This fund has generated strong long-term performance and provided an attractive yield. Nevertheless, considering the change to a team approach following the departure of the lead manager, Jason Pidcock, in May 2015, and some tweaks to the process, such as changing the yield target, we have proposed a switch rating for this fund. We do not believe that Newton Asian Income is a bad fund per se: it is run by the experienced in-house Newton Asian team. Nevertheless, considering both the team and process changes, our conviction in other alternatives is higher at present.
The fund aims to achieve a high and rising income together with long-term capital growth primarily through investments in securities in the Asia ex Japan region (including Australia and New Zealand). As with other Newton equity income funds strict yield criteria apply to all securities in the portfolio. Stocks are identified that initially pay a prospective yield in excess of that of the reference benchmark, the FTSE AW Asia Pacific ex Japan Index. This reduces the investment universe from over 1,500 stocks to around 600. Any stock whose yield falls to a 15% discount to the benchmark will be sold. The manager identifies stocks that offer an attractive yield, and also those that are in a position to significantly grow their dividend over the medium-to-long term.