Asia Pacific equities: A “quality income” approach
Investment managers Jason Pidcock and Sam Konrad explain their quality income style and discuss the company characteristics they look for.
Marketing Communication for professional and institutional investors only. Not for retail investors.
Markets are facing many unknowns and potential headwinds this year. In early August, we saw a sharp sell-off in global stock markets, mainly driven by a realisation that the US economy is slowing quite rapidly and concerns the US Federal Reserve may be behind the curve in cutting interest rates, even though inflation numbers have been loath to reach target. However, these sharp sell-offs were followed by a broad and rapid recovery in the days that followed.
Uncertainty and moments of heightened volatility are not unusual for investors. Instead, they are a reminder of the importance of following a robust investment process with a long-term investment horizon and a well-diversified portfolio.
The macroeconomic framework is a key driver of our portfolio construction, but ultimately, we are stock pickers. We consider a myriad of information, such as political systems, geopolitics, bond yields and global economic forces to help us decide which countries and sectors we want more or less exposure to, as well as those areas we want to avoid investing in. We are high-conviction investors and not index huggers.
We do not identify as growth or value investors, instead looking for a combination of the two. We focus on companies with earnings and dividend drivers, strong balance sheets, and adaptable management teams, with shares that are highly liquid. Compared to the fund’s benchmark, the FTSE AW Asia Pacific ex Japan Index, our portfolio typically has higher margins and return on equity (ROE), lower price-to-earnings and lower price-to-book multiples.
Our portfolio is diversified: we have exposure to both developed and emerging markets, investing in some businesses with revenues that are highly connected to the global economy, as well as others that are more “remote”. We choose to hold some cyclical stocks, as well as stocks that have very defensive business models. We hold some higher yielding, lower growth, more value-orientated stocks, as well as some lower yielding, higher growth stocks.
We have a combined 50 years’ relevant experience working in Asian markets. Our team size means we are flexible, nimble and dynamic, and we are the key decision makers. We are focused solely on the Jupiter Asian Equity Income strategy – we manage no other strategies.
Jason has managed the Jupiter Asian Income Fund, and the broader Asian Equity Income strategy, since its inception in March 2016. Sam joined Jupiter as a co-manager on the fund and strategy in 2022.
The Jupiter Asian Income Fund is now top decile in its peer group over all time periods: one month, three months, year-to-date, one year, three years and five years.
Jupiter Asian Income Fund – performance as of 31.07.24
Cumulative performance (%)
YTD | 3 months | 1 year | 3 years p.a. | 5 years p.a. | Since inception p.a.* | |
|---|---|---|---|---|---|---|
Jupiter Asian Income I Acc | 13.1 | 8.2 | 20.3 | 11.7 | 8.8 | 11.6 |
FTSE Asia Pacific ex Japan | 8.0 | 3.4 | 8.4 | 1.6 | 4.3 | 9.0 |
IA Asia Pacific ex Japan | 5.8 | 1.7 | 4.2 | -0.4 | 3.3 | 8.3 |
Quartile | 1 | 1 | 1 | 1 | 1 | 1 |
01 Aug ’16 to 31 Jul ’17 | 01 Aug ’17 to 31 Jul ’18 | 01 Aug ’18 to 31 Jul ’19 | 01 Aug ’19 to 31 Jul ’20 | 01 Aug ’20 to 31 Jul ’21 | 01 Aug ’21 to 31 Jul ’22 | 01 Aug ’22 to 31 Jul ’23 | 01 Aug ’23 to 31 Jul ’24 | Since inception* | |
|---|---|---|---|---|---|---|---|---|---|
Jupiter Asian Income Fund I GBP Acc | 13.5 | 2.7 | 14.4 | -7.2 | 17.8 | 11.5 | 3.8 | 20.3 | 151.0 |
FTSE Asia Pacific ex Japan | 23.8 | 5.9 | 5.5 | 1.9 | 15.6 | -4.5 | 1.3 | 8.4 | 106.9 |
IA Asia Pacific ex Japan | 23.2 | 5.0 | 6.9 | 0.5 | 18.5 | -5.4 | 0.1 | 4.2 | 95.6 |
Past performance is no guide to the future. Returns may increase or decrease as a result of currency fluctuations.
Source: Morningstar, NAV to NAV, gross income reinvested, net of fees, in GBP, Jupiter Asian income Fund I Acc, to 31.07.24. *Since inception: 02.03.16. Target benchmark: FTSE All-World Asia Pacific ex Japan. Comparator: IA Asia Pacific ex Japan.
- Currency (FX) Risk – The Fund can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.
- Pricing Risk – Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
- Emerging Markets Risk – Emerging markets are potentially associated with higher levels of political risk and lower levels of legal protection relative to developed markets. These attributes may negatively impact asset prices.
- Market Concentration Risk (Geographical Region/Country) – Investing in a particular country or geographic region can cause the value of this investment to rise or fall more relative to investments whose focus is spread more globally in nature.
- Market Concentration Risk (Number of holdings) – The Fund holds a relatively small number of stocks and may therefore be more exposed to under-performance of a particular company or group of companies compared to a portfolio that invests in a greater number of stocks.
- Derivative risk – the Fund may use derivatives to reduce costs and/or the overall risk of the Fund (this is also known as Efficient Portfolio Management or “EPM”). Derivatives involve a level of risk, however, for EPM they should not increase the overall riskiness of the Fund.
- Liquidity Risk (general) – During difficult market conditions there may not be enough investors to buy and sell certain investments. This may have an impact on the value of the Fund.
- Counterparty Risk – the risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the Fund’s assets.
- Charges from capital – All of the Fund’s charges are taken from capital. Should there not be sufficient capital growth in the Fund this may cause capital erosion.
- Stock Connect Risk – Stock Connect is governed by regulations which are subject to change. Trading limitations and restrictions on foreign ownership may constrain the Fund’s ability to pursue its investment strategy.
For a more detailed explanation of risk factors, please refer to the “Risk Factors” section of the Scheme Particulars.
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Important information
This document is intended for investment professionals and is not for the use or benefit of other persons, including retail investors. This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. Initial charges are likely to have a greater proportionate effect on returns if investments are liquidated in the shorter term. Past performance is not a guide to future performance. Company examples are for illustrative purposes only and are not a recommendation to buy or sell. Quoted yields are not a guide or guarantee for the expected level of distributions to be received. The yield may fluctuate significantly during times of extreme market and economic volatility. Awards/and Ratings should not be taken as a recommendation. The views expressed are those of the Fund Manager(s) at the time of writing/preparation, are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information provided but no assurance or warranties are given. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority.