ISA fund ideas: investing in Asia for income

Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

Investors are paying attention. Funds such as Lazard Emerging Markets and Artemis SmartGARP Global Emerging Markets are among Fidelity’s best-sellers this year.  

• Read: Top 10 best-selling ISA and SIPP funds of 2026

Share price growth is just one part of the story, however. Asia is also a rich source of dividends, meaning it holds plenty of appeal for investors seeking high income ISAs or pensions.

This is a little counterintuitive. Asia is typically viewed as a growth market, filled with emerging economies and young companies. However, it is increasingly attractive to income seekers who want to diversify away from the UK and Europe. Southeast Asia, which includes countries like Singapore and Indonesia, boasts a particularly high dividend yield.

Why now?

For many years, there has been a ‘big picture’ argument in favour of Asia. After all, it contains the world’s biggest emerging economies - China and India - and the economic growth outlook is strong.

It also has a large and, youthful workforce. Asia is home to around 60% of the global population and has a median age of 32, compared to Europe’s average age of 42.5.

Despite its structural advantages, however, Asia has lagged its international rivals until recently. What has changed?

Crucially, the US has stumbled. Investors are increasingly nervous about America’s erratic trade and military policies, its high level of debt, and the valuations attached to its biggest tech stocks. As such, they have started looking further afield for investment opportunities - and many Asian equities look cheap by comparison.

The depreciating US dollar has also proved important. This is because a weaker US dollar improves the spending power of Asian consumers; reduces the region’s imported inflation; lessens the burden of dollar-denominated debt; and boosts the price of commodities, a key export for many emerging markets.

The picture has changed since relations between the US and Iran broke down, however. Historically, oil supply shocks have not been kind to Asia’s emerging economies, and the US dollar has started to strengthen again.

It is not all about America, however. Portfolio managers argue that Asia, which boasts around 20,000 listed companies, is becoming more attractive in its own right - not least because there is a growing focus on shareholder returns.

South Korea, for example - which is dominated by family-controlled conglomerates known as ‘chaebol’ - changed its commercial code last year to improve shareholder rights. The country follows in the footsteps of Japan, which has been overhauling corporate governance rules for several years.

Shareholders are reaping the rewards, with companies returning more cash via dividends.

Asia is also at the forefront of the AI revolution. South Korea, for example, is home to two of the world’s biggest chipmakers, Samsung Electronics and SK hynix. This can lead to short-term volatility, as we’ve seen this year. Over the longer term, however, it puts Asia at the heart of exciting technological change.

How do I invest?

There are important risks to be aware of. Asia contains lots of emerging markets, which are considered riskier than developed markets. Energy stocks volatile exchange rates, low liquidity, corporate governance scandals and economic shocks can all cause problems for investors. 

If you are comfortable with these risks, however, there are various ways to invest in Asia - and the following funds featured on Fidelity’s Select 50 are a good starting point.

• See our Select 50 funds

Schroder Oriental Income Fund

Dividend yield: 3.0%

This investment trust hunts down high quality, high yielding stocks in Asia Pacific. With a team of over 40 analysts based across six offices in the region, it has plenty of firepower to do so - and it has increased its dividend every year since it launched 20 years ago.

The geographical makeup of the portfolio is striking. China represents just 14% of the fund, compared with 27% of the index. In contrast, Singapore is over-represented.

Portfolio manager Richard Sennitt gives a couple of reasons for this. He flags that the Chinese market contains lots of internet platform companies, with low or no dividends - not suitable for an income-focused fund. In contrast, Singapore has been good at returning cash to shareholders and is increasingly important as a financial centre.

• More on Schroder Oriental Income Fund

Lazard Emerging Markets Fund

Dividend yield: 2.14%

Lazard Emerging Markets invests Latin America, Africa and parts of Europe as well as Asia. However, most of its top holdings are in Taiwan, South Korea or China. The fund focuses on value, hunting down companies with depressed share prices. Although income is not front and centre, however, it has a dividend yield of over 2%. 
The fund is managed by a long-standing, experienced manager who has remained true to his value style despite an extended period of style headwinds. James Donald is backed by an experienced and stable team. This is important for a global emerging markets manager because regional markets can be idiosyncratic, and companies are not always directly comparable to their developed market peers.
This fund could blend well with a 'quality' fund that invests in businesses which are financially stronger or have competitive advantages but tend to be more expensive.

• More on Lazard Emerging Markets