Legal & General Asian Income Trust celebrates reaching its five year anniversary.
27 November 2013
Five years of attractive performance and five thoughts for the next five years
On the fifth anniversary of the Legal & General Asian Income Trust, fund manager Paul Hilsley looks at five investment themes within Asian markets that he believes are likely to impact returns over the next five years.
“Investors have turned to Asia in their search for income, with its 14 distinctive markets providing a multitude of opportunities for diversifying income sources. Confidence in the region has grown, Asian dividends are built on solid foundations, earnings growth in the region is strong and payout ratios are increasing. Improving shareholder consideration is only set to get better in the next five years too. We believe that the outlook for Asian Income remains strong and as such it will remain a valuable area for investors to seek returns”, comments Paul Hilsley.
Paul’s five predictions for the Asian markets in the next five years:
1. Asian economic growth will remain resilient in the long term despite ultimate withdrawal of US liquidity as Quantitative Easing (QE) ends.
Despite recent volatility and evidence that US liquidity has bolstered Asian physical asset markets, secular economic outperformance will be supported even when QE ends. With demographics, the development of the middle class consumers, with their increased spending power and the continued investment into essential infrastructure remaining supportive, this and other potential external shocks can be navigated. Governments will also, if necessary, use their other available levers in terms of administrative and monetary policies to offset downside risks. This may ultimately be in significant contrast to some highly constrained western governments.
2. Dividends will continue to grow in importance for Asian companies.
Asian companies are increasingly focusing on shareholders, as a result of western corporate governance policies being brought to the region as governments want to extract value from their state owned enterprises to fund their fiscal accounts. Family companies' shareholders will become more diverse. Thus we could expect to see an increase in their payout ratios.
3. The Chinese Government will turn its attention to improving their capital markets in order to provide better savings alternatives for individuals.
This will deflect savings away from the inflated property market, reducing unwelcome pressure there, and provide savers with more choice. The existing listed companies may be part of this but there may well be a large number of additions to the equity market via new offerings to improve the quality of the available stock.
4. Asian brands will increase in prominence in the west.
Following in the footsteps of the technology and automotive sectors, where the likes of Samsung and Hyundai have built established positions, other Asian brands and sectors will become increasingly commonplace on western high streets.
5. Country-specific resilience.
Australia will remain the “lucky country” with Asian demand continuing to absorb their natural resources and, with the significant resource investment we have seen being successfully negotiated, the economy will remain recession free.
Since its launch in 2008, the Legal & General Asian Income Trust has returned 133.0%1, compared to the IMA Asian Income sector average of 109.1%2, and has outperformed the FTSE All World Asia Pacific ex Japan Index return of 115.8%3 whilst demonstrating significantly lower volatility.
Paul Hilsley comments: “The Trust has delivered across a full market cycle, which included the global financial crisis and its aftermath, government bailouts, leadership change in China and quantitative easing. We are pleased that our simple, repeatable process has achieved what we set out to do: to provide our investors with strong capital growth, reduced volatility and strong, sustainable income.”
1 Source Lipper as at 10 November 2013
2 Source Lipper as at 10 November 2013
3 Source Lipper as at 10 November 2013
Notes to editors
The information contained in this press release is intended solely for journalists and should not be relied upon by private investors or any other persons to make financial decisions.
The value of investments and any income taken may fall as well as rise, and investors may get back less than they invest. Past performance is not a guide to future performance.
The Legal & General Group, established in 1836, is one of the UK’s leading financial services companies. As at 30 June 2013, we were responsible for investing £440 billion worldwide on behalf of investors, policyholders and shareholders. We also have over seven million customers in the UK for our life assurance, pensions, investments and general insurance plans.
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