First State Dividend Advantage: Assess if this investment fund suits your financial goals

Find out whether you should invest in FSSA Singapore with our review
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Last Updated on by Tree of Wealth

First State Dividend Advantage might be an appropriate investment choice if you want to include equity exposure in your portfolio. It’s also suitable for those with a longer time horizon for their investment gains. If you’re unsure whether you should invest in First State Dividend Advantage(also known as First State Diva), continue reading our overview.

What is First State Dividend Advantage?

First State Dividend Advantage (FSSA) is an investment-linked policy with majority fund allocation to equities of Asia Pacific-based companies, excluding Japan. Most of the companies are based in China and India and selected based on potential dividend growth and long-term capital appreciation. The companies span several sectors, with financial, infotech stocks, and consumer staples as the primary asset classes.

First Sentier Investors, based in Singapore, manages the fund. Its custodian is The Hongkong and Shanghai Banking Corporation Limited (HSBC).

FSSA’s primary objective is to provide regular dividends from share investments in the Asia-Pac region. In the long term, investors can expect capital growth if they continue to maintain their funds without premature withdrawal.

Benefits of investing in First State Dividend Advantage

Here is our FSSA Dividend Advantage fund review. We think that the fund offers varied exposure to high-quality Asian equities. Since its inception in 2004, the fund has had a strong performance. Additionally, the fund invests most of its assets in a Dublin registered umbrella fund known as First Sentier Investors Global Umbrella Fund plc (the underlying sub-fund), which designs investment strategies with the bottom-up approach.

The approach means identifying quality companies with a reasonable valuation and critical characteristics such as sustainable growth trajectory, management quality, and franchise strength. This means that the FSSA portfolio includes equities on the off-benchmark positions, allowing investors to diversify to broader Asia investments. Additionally, its project manager, Martin Lau, has helmed the fund since 2004 with an experienced team of investment professionals.

Investors who are interested in FSSA will benefit from the below points:

  • A chance to include diversified Asia-Pacific portfolio exposure
  • Benefit from consumer staple equity allocation due to Asia’s domestic brands
  • Investment in pharmaceutical firms and telecommunications

Asia’s rapidly increasing population, urbanisation and income levels have led to a rise in the region’s push for rapid innovation. According to McKinsey, in 2019, Asia will drive 40% of the world’s consumption and 50% of global GDP by 2040. Investing in FSSA allows investors to tap into the region’s growth.

Additionally, many consumer goods businesses in the region are well-placed to continue expanding. An example is Vitasoy. With a stronghold in Hong Kong, it also has a ready market and brand presence in other Asia Pacific countries (excluding Japan). The Singapore brand’s healthy margins and forward expansion will continue to boost its equity appreciation.

Furthermore, FSSA also has invested in Australian-based CSL, which is a leading biopharmaceutical company. This is a firm that focuses on vaccines and plasma therapies. Its recent acquisition of Vifor Pharma has also generated much interest. Another notable company is Tencent Holdings. According to Morningstar’s analysts, China-based Tencent Holdings is well-positioned to deliver above-average results in the next quarter.

However, we do also note that there are several risks with investing in this ILP. Since you are exposed to the Asia-Pacific market, your investments also bear the impact of any news that may affect A-PAC adversely. In addition, the value of the returns, should you choose to redeem your capital, is based on the timely selling of assets on Dealing Day. Finally, there is a liquidity risk if you are looking for short-term cash returns as the Underlying Fund may not be able to sell the assets at a reasonable price in time. In short, this fund is more suitable for those willing to hold the investment in a medium to long-term period. It is not recommended for short-term speculation.

Additionally, you will need to accept any risk associated with equity investment which may cause you to lose some or all of your investment. Since there is no principal protection, investors must consider their financial goals carefully before investing in this fund.

What is FSSA investing in?

The fund focuses on the Asia-Pacific Region(excluding Japan) and Global Emerging Markets. There is a small percentage allocated to companies based in the US (3.1%).

The fund’s top ten company investment is as follows:

  • HDFC Bank (Financials) 6.0
  • Taiwan Semiconductor (TSMC) (Info. Tech.) 4.6
  • CSL (Health Care) 3.8
  • Tencent Holdings Ltd. (Comms Services) 3.5
  • ICICI Bank (Financials) 3.3
  • Samsung Electronics Co Ltd Pfd
  • NV (Info. Tech.) 3.2
  • Midea Group (Consumer Discret.) 3.2
  • AIA Group Limited (Financials) 3.2
  • ResMed (Health Care) 3.1
  • Keyence Corporation

You can find more information in the First State Dividend Advantage fund factsheet here.

What is FSSA’s principle or belief?

FSSA Investment Managers, a subdivision of First Sentier Investors, which manages the FSSA fund, have mentioned that they take a bottom-up approach to selecting companies for investment. That means taking a long-term view, considering each company’s position in terms of its resilience and management approach.

The investment philosophy that guides their choice is to search for companies with dominant market share in niche industries. This also means shortlisting companies with solid innovation ability and a positive people-centric corporate culture.

In an interview with Citywire, fund manager Martin Lau echoed this sentiment.

His 5-year view of the Asia Pacific region has led him and his team to focus on the consumer staples sector, believing that demand will remain indefensible.

He has also identified opportunities in India, the Philippines, and Indonesia, noting that the trajectory of growth in these countries is similar to China’s in the last decade.

How to invest in First State Dividend Advantage Singapore

Contact our financial consultants here to learn how to invest in First State Dividend Advantage Singapore, or simply fill in the form below and our licensed financial advisor will get in touch with you.

You can use cash or your Supplementary Retirement Scheme(SRS) funds. However, note that you will not be able to use your CPF Investment Account to fund this investment.

Investing is a personal choice. It’s important to understand that the information in this article is not investment advice, nor does it take into account your financial situation or goals. Consult with a financial professional before deciding. You’ll gain a clearer picture of your financial situation with a non-obligatory, complimentary consultation with our licensed financial advisors. Contact us today.

 

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