Fidelity fund manager Polly Kwan says her newly launched Asian Dividend fund is an “all weather strategy” that is suitable for both bear and bull markets by combining sustainable dividend stocks with dividend growth companies.
By comparing the similar total return strategies of the new Asian Dividend fund with her existing Asia Pacific Dividend Sicav, Kwan challenges the “misconception” that dividend style products are only suited to bear markets.
“A lot of people look at dividend style investments with the misconception that they are only a bear market strategy. When we planned for this fund launch and also working on my other Sicav fund I did a very detail study, looking at the total return in different parts of the cycle,” she says.
“Interestingly this is not really a bear market strategy, it is an all weather strategy which worked very well not only in the bear market but also in the bull market.”
Kwan also adds that looking at the MSCI AC Asia Pacific ex Japan Index over a one to three year horizon, the region looks set to move into bull market territory.
The strategy is able to work throughout both bear and bull markets by differing from its peers through the inclusion of both sustainable dividend companies and dividend growth stocks, says Kwan.
She adds: “The reason why I have a combination of both dividend and dividend growth stocks is that actually while dividend stocks is a good investment style itself already, if you have picked the right stocks and included the growth, actually you will generate an even better outcome.”
The additional focus on dividend growth stocks within the fund means that the it does not have a high allocation to the traditional defensive sectors such as telecoms or utilities, according to Kwan.
“Instead I have a slightly higher proportion in some of the sectors that people don’t generally hold in a dividend fund, those which I think have the potential to start getting dividends or paying higher dividends,” she says.