JP Morgan Asset Management has started marketing an Asia-Pacific income fund to retail investors that it converted from one of its old balanced funds.
The remodelled product is an Asia ex-Japan multi-asset portfolio comprising high dividend stocks, Reits, and high-yield and investment grade bonds. The dynamic allocation between bonds and equities (including Reits) can range from 25% to 75%, respectively.
Multi-asset income funds have become a trend post-crisis as managers sought to capitalise on investor demand for yield, typically featuring solid dividend payers and select sovereign and corporate bonds.
Over 120 such mixed allocation products have been launched in Asia alone, with funds from both HDFC and Schroders leading the pack by assets at over $1.1 billion each, according to data from Statregic Insight.
By inflow the Schroder Asia Asset Income Fund is the market leader, having only been launched in June last year. Returns in the year to end-May range from +10.44% (K-Asset Global Fixed Income 4) to -17.32% (Hong Leong Global Resources Income), by Strategic numbers.
JP Morgan moved to refit the former JF Pacific Balanced Fund (over 11 years old) into the JF Asia Pacific Income Fund effective from June 14. This product is for sale in Hong Kong, Singapore and Taiwan, although a spokesman says that could be extended to other parts of the region.
One of its key features is monthly distribution to investors in the “mth” class, and the firm notes distribution may be paid out of capital. There is an annual distribution in the “dist” class.
This is available in US dollars and Hong Kong dollars, although the US dollar class is expected to distribute dividends annually. As at June 18 the fund’s portfolio yield was 6.1% per annum.
Terry Pan, head of Hong Kong business at JP Morgan AM, notes the fund will have active input from the firm’s Asia-Pacific equity team (66 investment professionals in the region) and fixed income team (12-strong) with a bottom-up approach and dynamic allocation.
“In other words, this is not a plain vanilla balanced fund by any means,” he indicates. The new product is not exposed to Japan, whereas the old balanced fund was.
Jeffrey Roskell, one of three fund managers for JF Asia Pacific Income Fund (along with Adam Upton and Stephen Chang), says the equity portfolio at present has a beta of about 0.75.
“While we expect markets to remain volatile in the next few months, we are also seeing a need from our clients to derive an income on their investments,” he states.
“We see a wide range of stocks in Asia which have high dividend yields and can invest in Asian equities with historic yields that are significantly higher than US Treasuries and more than Asian investment grade bonds.”
Initial fund allocation started at 70% equities and 30% bonds. Within equity, 56% was in high-dividend stocks and 14% in Reits. By sector, its major overweight is financials (47.7%, including Reits and brokerages), industrials (16.3%, toll roads), telecoms (15.6%) and utilities (7.4%).
On the bond side, 9% accounted for investment grade sovereigns and 9% for investment grade corporates, while high-yield consisted of 8% and high-yield sovereign 4%.
In terms of country exposure, the portfolio is heavily overweight Thailand against the benchmark (50% MSCI AC Asia Pacific ex-Japan Net Index, 50% JP Morgan Asia Credit Total Index).
It is also noticeably overweight Hong Kong and Singapore against the benchmark, and underweight Korea, China, the Philippines, Taiwan and India.
The minimum subscription amount is $2,000, HK$5,000 via online or monthly investment of HK$1,000 through investment tool eScheduler. The management fee is 1.5% per annum.