Henderson’s Asia equity manager reveals strategy shift

Henderson’s Michael Kerley has reverted to the original focus of his Asian equity income fund following a year of attempting to capture off-benchmark opportunities in higher yielding equities.

The former Citywire A-rated manager said he has moved back to looking at companies with strong dividend-growth potential as part of a strategic review of the Henderson HF Asian Dividend Income fund.

‘The focus in 2012 was on high-yielding stocks as they were rewarding,' he said in an investor note. 'However, we believe there is now better value available in companies that exhibit the potential for dividend growth compared to certain high-yielding equity stocks, which are looking expensive.'

‘Therefore, we have been actively reducing exposure to the more defensive high-yield sectors that have reached our target prices and adding to dividend-growth companies where valuations are more appealing.’

This change of focus coincides with a reduction in the fund’s overall exposure to utilities and materials companies.

He now holds underweight positions in both of these sectors - 5% in materials and 3.2% in utilities - compared to the fund’s benchmark, the MSCI AC Asia Pacific ex Japan Index.

Kerley said he has taken this stance as he is seeking to limit exposure to the ‘volatile export cycle’ and instead focus his attentions on the Asian consumption story.

‘The fund retains a domestic bias, particularly to businesses within the consumer discretionary, property, telecommunications and industrial sectors, which continue to provide attractive exposure to the Asian consumer story at below market valuations,’ he said.

He pointed to South Korean casino-operator Kangwon Land – a 2.3% position in the fund – as well as and telecoms firm SK Telecom (2.4%) as examples of stocks he expects to outperform in 2013.

Henderson HF Asian Dividend Income fund has returned 36.62% in US dollar terms in the three years to the end of January 2013. This compares to its benchmark, the MSCI AC Asia Pacific ex Japan TR USD, which rose 34.63% over the same period.