The fund will target a regular monthly yield, equivalent to 7% per year, through investment in high dividend stocks in Asia Pacific ex Japan and a covered call strategy. The fund will be run by the same investment management team as the UK version.
Thomas See, head of structured fund management, will be responsible for the covered call strategy, while Richard Sennitt, manager of Schroder Asian Income fund, will be responsible for stock selection.
The fund will differ from the original fund in that it will place a greater emphasis on large and mid- cap stocks, with a market cap at the time of initial investment of over $2bn.
Also, a portion of the portfolio will be left without call options, allowing the managers to invest in stocks and markets where option activity is more limited, or where the upside potential may be particularly strong. This proportion will change with market conditions.
Thomas See, co-manager of Schroder Asian Income Maximiser and Schroder ISF Asian Dividend Maximiser, said: “For an investor able to accept the inherent risk in an equity investment, the Maximiser strategy has the advantage of drawing from two sources of yield, stock dividends and call option premia, which are both independent of low interest rates, which is depressing investment returns and making it hard for investors to find yield.”
The £220m Schroder Asian Dividend Maximiser fund, launched in June 2010, currently sits sixth in the IMA Asia ex Japan sector over three years, having returned 26.9%. It has a yield of 6.89% (source: Financial Express). The fund has slightly underperformed the Schroder Asian Income fund, which is up 29.9% over the same period with a yield of 4.14%.
The UK-domiciled fund is currently significantly exposed to Australia, which makes up 21.7% of the portfolio. It also has a high weighting in financials, which are around one-third of the fund.