Investment Companies News

Mike Kerley, manager of Henderson Far East Income, says that Asian markets have been buoyed by strong global economic performance and improving domestic demand.

The investment company moved to list in Jersey in December last year to provide the fund with more investment flexibility and to generate tax savings that would boost income available for distribution. The move has met with some success in its first year. Total dividends rose 30.9%, compared to the equivalent period last year. The board has forecast a further dividend increase of 9.1% for the coming year.

The company has delivered a net asset value total return of 28.6% for the year to 31 August and a 35.2% increase in its share price.

Kerley has been focused on domestically orientated companies and away from cyclical and export related areas. This has led to a bias to towards financials, infrastructure and telecoms. Financials currently make up 37.5% of the portfolio, industrials 20.2% and telecoms 9.9%. Among the company’s top holdings are Hang Seng Bank, Singapore Telecommunications and Macquarie Airports. The company is currently underweight in resources, materials and technology.

Kerley said: “Our key assumption is that the US will slow, weighted down by an over-indebted consumer and rising interest rates. The medium to long-term prospects for Asia remain extremely positive. The economic fundamentals are very supportive and together with the positive changes that have taken place in the corporate sector make Asia an attractive investment destination.”

The company has no official benchmark, but uses the FTSE All-World Asia Pacific ex Japan index as a guide. Share price performance to 30 September has been well below that of the index. It is 11.5% below over 1 year and 46.6% below over three years. However, this is a peril of targeting income stocks in the frothy Asian markets and the company has been successful at delivering a consistent income stream.

Kerley took over day-to-day responsibility for the portfolio in February 2007 from Michael Watt, who retired from Henderson. Performance does appear to have weakened since Kerley took over, but this may just be a function of a readjustment of the portfolio. However, investors would do well to wait for a clearer picture of Kerley’s investment credentials before buying.