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Value Partners brings dividend fund to onshore China

The fund, which has an 18-year track record, is distributed through the Mutual Recognition of Funds scheme.

Value Partners has launched the Value Partners High-Dividend Stocks Fund through the Hong Kong-mainland MRF scheme, according to a statement from the firm.

The product received approval from the China Securities Regulatory Commission (CSRC) in November last year, according to the regulator’s records. Tianhong Asset Management is the fund’s master agent, the statement said.

Norman Ho has led the fund since inception in 2002. He seeks undervalued dividend-paying companies in Asia ex-Japan with an emphasis on Greater China, and targets a 4% yield.

Top holdings include Taiwan Semiconductor Manufacturing (6.4%), Samsung Electronics (5.9%) and China Construction Bank (4.9%), according to its factsheet.

The top three sectors are information technology (20%), industrials (15%) and real estate (14%).

Since 2002, the fund has outperformed its benchmark, the MSCI AC Asia ex-Japan Index in 13 out of 17 calendar years with an annualised return of 12.2%, Value Partners said, citing Morningstar data.

Morningstar acknowledged the fund’s “strong long-term track record” in a March report but said it takes down the forward-looking analyst rating to neutral from bronze due to high fees.

“The strategy charges a 15% performance fee on any positive returns with a high-water mark, which can result in hefty expenses in up markets even if the strategy underperforms the benchmark,” the ratings firm said in the report, which also cited two team departures who have not been replaced.

Dividend cut pressure

The global shutdown of activity due to the COVID-19 and subsequent earnings reductions have prompted widespread dividend cuts, including HSBC and Standard Chartered, which have come under fire from shareholders after declaring no dividends will be paid in 2020.

More dividend cuts across the globe are likely as the true extent of economic damage is revealed.

“We have seen global assets facing setbacks since the virus outbreak, and high dividend stocks are not immune. However, the fundamentals of the quality companies in the region remain intact. Quality stocks paying high dividends are believed to enjoy a strong rebound when markets recover from panic,”  Ho said in the statement.

“I expect governments in Asia to continue adopting broader fiscal and monetary policies to stimulate the economy, which will help improve corporate earnings,” Ho added.

The firm spokeswoman added that the portfolio yield was 5.2% as of the end of March 2020, “above our target yield of 4%”.

She said that new sectors such as e-commerce have been added “to better position the portfolio for secular growth areas”.

In the top ten holdings, the portfolio has Alibaba, which pays no dividend.

The Morningstar report noted that Ho’s fund has missed out on the high growth of China’s big internet names, which pay little or no dividends, and he now plans to “allocate up to 10% of the portfolio to the index-heavy, growth-oriented names going forward”.

 


The Value Partners High-Dividend Stocks Fund vs category average and benchmark

Source: FE Fundinfo. In US dollars, three-year cumulative performance.

Part of Mark Allen.