Japan out as focus shifts to sweeter Asian equities

PUBLISHED : Monday, 06 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 11:03pm


Many investors these days find themselves in a quandary, says Jeffrey Roskell, managing director at JF Asset Management's Pacific Regional Group. The prevailing mood is one of risk aversion, he says, but at the same time investors are also looking for income that might offset the effects of inflation.

This explains the deluge of income funds that have been arriving in Hong Kong of late.

These tend to follow a pattern. They invest in bonds, high-dividend stocks and reits. They add a bit more risk than is seen in a typical bond fund, and therefore aim for higher yield, with the sweet spot seeming to be 6 per cent.

The JF Asia Pacific Fund, restructured from the previous JF Pacific Balanced Fund, is exactly of that mould. With a portfolio yield as of June 18 at 6.1 per cent, the fund capitalises on growing interest in high-yield Asian equities, which - along with high-yield bonds - are the favoured asset of the moment.

With a management fee of 1.5 per cent and an initial charge of up to 5 per cent of the net asset value, the fund at present allocates 65 per cent of its exposure to equities, including 10 per cent to real estate trusts, and 35 per cent in bonds. The mix can range from 25 per cent to 75 per cent in either asset class.

The fund was restructured to omit Japan. The country was excluded because of the low yields seen on its equities and bonds - a byproduct of 15 years of deflation.

Roskell says the fund is based on a value-investing strategy, and that a dividend-yield strategy has outperformed the market almost every time over the past decade. 'Yield hasn't historically been a focus in Asia, since it is seen as a growth region,' Roskell says.

The fund consists of 42 stocks and 68 bonds. On the equities side, 85 per cent of holdings are concentrated in four markets: Hong Kong, including China stocks listed in the city, at 35 per cent, 20 per cent in Australia, 18 per cent in Singapore and 12 per cent in Thailand.

Some of the favoured plays at the moment include Thai banks and toll roads, Singapore-listed reits and telecoms, and Hong Kong-listed reits, toll roads and utilities. Roskell is also keen on Indian, South Korean, Indonesian and (some) Malaysian bonds.

The fund's holding consists of a combination of high-yield and investment-grade sovereign and corporate bonds.