Schroder Oriental Income Fund reports mixed interim results

LONDON - Schroder Oriental Income Fund Limited (LSE:SOI) disclosed its interim results for the half-year ending February 28, 2025, revealing a net asset value (NAV) total return of 2.5%. This performance trailed its benchmark, the MSCI AC Pacific ex Japan Index, which returned 10.4% over the same period.

The fund, managed by Richard Sennitt, experienced relative underperformance partly due to an underweight position in China. However, Sennitt adjusted this stance by investing in select high-quality Chinese companies during market weaknesses. Additionally, he established a position in Power Grid, an Indian company not included in the fund’s benchmark.

Despite the underperformance in the short term, the fund’s long-term returns remain robust, with a five-year return more than doubling that of its benchmark as of the end of the reporting period. The region has faced tariff-induced market volatility, yet Schroder Oriental Income has managed to deliver positive absolute returns since then.

Revenue for the fund decreased slightly by 1.3% compared to the previous year. The fund is known for increasing its final dividend annually, a trend that, if continued, could earn it the Association of Investment Companies’ (AIC) ’dividend hero’ status. The fund’s board has indicated that its substantial reserves could be utilized to support this tradition.

Gearing, or borrowing to invest, remained stable throughout the period and contributed marginally to the fund’s performance. Nick Winsor, the new chairman, commented on the strategy, emphasizing the relevance of investing in income-generating companies with solid financials to navigate market challenges.

Post-period performance has been favorable, with the fund successfully navigating post-Liberation day volatility. The board’s ambition to extend the dividend growth track record to 20 years could make Schroder Oriental Income the first Asia-focused trust to achieve ’dividend hero’ status.

Kepler Trust Intelligence, in their analysis, noted that the fund’s long-term outperformance is noteworthy despite recent challenges. They highlighted the narrowing of the fund’s discount and the positive share price returns. The report also mentioned that several of Schroder Oriental Income’s peers have adopted enhanced dividend strategies, which could lead to a divergence in portfolio profiles due to the fund’s valuation discipline.

This article is based on a press release statement and reflects the interim results and analysis provided by Kepler Trust Intelligence.

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