How big does an ISA need to be for someone to quit work and retire early?
Ben McPoland explores how long it might realistically take to reach financial freedom investing regularly in a Stocks and Shares ISA.
Posted by Ben McPoland
Image source: Getty Images
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Most people invest inside a Stocks and Shares ISA to help them live a more comfortable life later on. Some might even reach a point where their portfolio supports early retirement.
But how realistic is this ? And how long might it take? Let’s take a closer look.
Aiming for £1.5m
The obvious thing to note is that what one person would need in retirement is totally different to someone else. So is the affordable amount to invest every month.
For example, industry data show that most people fail to max out their £20k annual ISA allowance. When we consider that the median full-time annual salary in the UK was about £37,000 last year, this makes sense.
As such, what sum and time is needed is highly variable. But for simplicity’s sake, I’m going to assume a figure of £1.5m would be enough.
Wealth-building takes time
Now, reaching that amount might sound like a fairy tale when starting from scratch. But the following table shows how quickly this sum could be reached investing £600 every month. I’ve included three rates of annual return (8%, 10%, and 12%).
8% return*
10% return
12% return
37 years
32 years
28.5 years
*Figures do not include platform charges, and assume all dividends are reinvested.
Taking the middle 10% return scenario, this shows that it would take 32 years to reach £1.5m. So a 30-year-old could quit work and retire at 62 rather than 68 (or whatever the State Pension age is by then).
Were this investor to achieve a higher 12% average return, this would shave nearly four years off.
Some top investors have generated returns far in excess of 12%, including Warren Buffett (an incredible compounded annual return of about 20%). A person generating such a return would reach this target inside 21 years.
However, this type of return is very rare (after all, there’s a reason Buffett is a celebrated billionaire!). Indeed, 12% might even be stretching it, as the long-term global market average is more like 9%-10%.
To show what’s possible, here are two tables showing how quickly £1.5m could be reached investing £1,000 and £1,666 per month (the latter being the maximum allowance).
£1,000 per month
8% return
10% return
12% return
31 years
27 years
24 years
£1,666 per month
8% return
10% return
12% return
25 years
22 years
20 years
If you are starting out with a dividend re-investment plan, the good news is that compound interest takes a while to make a noticeable difference, better if you can add fuel to the fire with a yearly contribution.
Investors have a number of options. While they could buy UK government bonds (gilts), with 10-year gilts yielding 4.7%, they could also stray into the corporate bond market, where yields are even higher. However, bond prices can be very volatile, and investors could be hit with capital losses even if the income is stable.
Savings accounts are another option, but yields tend to lag bond market equivalents. Moreover, unless the account is inside a cash ISA, where returns are lower, savers may have to pay tax on their returns.
Basic-rate taxpayers (up to £50,270 annual income) get a £1,000 tax-free savings allowance, while higher-rate taxpayers (up to £125,140 annual income) get £500 and additional rate taxpayers (earning more than £125,140) get nothing. Any savings interest above the thresholds is taxed at income tax rates.
Money market funds could fit the bill
Money market funds are a viable in-between option, offering the income similar to gilts maturing soon, but without the complexity, while also mitigating the risk of bond price fluctuations. They can be held inside ISAs and SIPPs.
They own a diversified basket of safe bonds that are due to mature soon, normally within just a couple of months, meaning that investors can earn an income on their cash with minimal risk. They can also put money into bank deposit accounts and take advantage of other “money market” instruments offered by financial institutions.
On our platform, assets in money market funds have risen 1,100% (a 12-fold increase) in the past two years.
Fund industry trade body the Investment Association (IA) categorises money market funds into two buckets: short-term and standard-term funds.
Short-term funds are lower risk. Fund managers try to ensure the highest possible level of safety by keeping very short duration bonds and high-quality bonds in the portfolio.
Standard money market funds generally deliver slightly higher returns by owning bonds that have slightly longer maturity dates. There are also less stringent liquidity requirements.
The Royal London Short Term Money Market fund is one of interactive investor’s Investment Pathway options for investing in drawdown to access all or part of their pension. The Royal London option is for those planning to take out all their money within the next five years.
Source: FE Analytics/ latest data published as of 31 August 2025. *One-day yield figure sourced on 3 October. Past performance is not a guide to future performance.
Investors usually have a choice between an accumulation (acc) or income (inc) version of a fund, which determines whether income is automatically reinvested or paid out as cash.
Dzmitry Lipski, head of funds research at interactive investor, says: “Royal London Short Term Money Market stands out most to us in the sector. It has an excellent long-term track record, low drawdowns and is competitively priced with a yearly ongoing charge of 0.10%.
“The fund seeks to maximise income by investing in high-quality, short-dated cash instruments. The managers place particular emphasis on the security of the counterparties it lends to, while ensuring daily liquidity.”
The interest paid by money market funds will fluctuate with bond market yields, which are closely linked to central bank interest rates. This means it will rise when yields rise, but fall when yields fall. As interest rates are expected to keep dropping this year and next, yields on money markets are also likely to drop.
Bond yield: the key terms
There are three key terms that bond investors need to get their heads around: yield to maturity (also known as the running, or redemption yield), historic (or annualised) yield, and distribution yield.
Assuming all portfolio coupon payments (the level of interest promised) are made, and the principals on bonds (amount lent) are returned, the yield to maturity of a portfolio is the total annual return of a fund if all bonds are held to maturity. This assumes no portfolio changes. It’s a measure that bond fund managers use to assess what their portfolio is forecast to return, including when they get their capital back when a bond matures.
In reality, these figures change as the fund manager is constantly selling and buying bonds, but they are a helpful snapshot about return potential and income distributions.
Advantages of a money market fund
Very low risk, with the portfolio likely to at least hold its value and also pay out a modest income
Diversified, meaning investors are not exposed to a single bond failing and can withdraw their money easily
Can be held in a tax-friendly wrapper, such as an ISA or SIPP.
Disadvantages of a money market fund
Investments may fall in value, unlike savings accounts
Not suitable for growing savings over the long term as inflation will eat into returns
Sensitive to interest rate fluctuations, with lower rates leading to lower yields. Yields rise when interest rates rise
The Bank of England warns that in times of market panic and a rush to cash, there may be liquidity issues in money market funds.
This article was originally published on 30 October 2023 and updated on 3 October 2025.
Somewhere to squirrel your spare cash into, hopefully profits when you rebalance your Snowball, as you wait for the next market crash, so you have funds to buy a bargain. Sacrificing some near term interest for longer term gains.
These Utility Dividends Up to 10% Are Riding the AI High
Brett Owens, Chief Investment Strategist Updated: October 24, 2025
Wall Street still treats utilities like income relics. Big mistake.
The same wires and substations that power your home now feed NVIDIA’s data centers—and our portfolios. These “boring” utilities are morphing into AI toll collectors, handing us up to 10.4% dividends while vanilla investors chase momentum stocks.
Take Texas, for example. The grid is strained. The population is popping. New residents, factories and AI campuses are all plugging into the state’s aging grid at once. The math is no longer “mathing” and it’s about to get worse. ERCOT projects power demand will jump 62% by 2030—yikes!
And Oncor, the state’s largest utility, believes that is way too conservative. Its interconnection queue shows 186 GW of requests waiting to plug into the grid—more than double today’s peak demand (118% more!) and enough to power every home in Texas twice over!
Texas isn’t the home of the only strained grid. Let’s head to the Northwest and visit Portland General Electric (POR, 4.8% yield), which provides electricity to 1.9 million customers across more than 50 cities in Oregon. Thanks to early AI grid work, this near-5% payer is one of the few “boring” utilities with genuine growth voltage.
This West Coast Utility Delivers Even-Keeled Price and Dividend Growth
“PGE” is gearing up for the AI revolution. Recently, it announced that it’s using a new AI-enabled flexibility tool that will free up more than 80 megawatts for datacenter interconnections next year. Here’s a little detail, courtesy of digital business mag Utility Dive:
“PGE partnered with the California-based startup GridCARE, which uses AI, detailed hourly demand modeling and optimized flexible resources like batteries and onsite generators to find spare capacity. The added flexibility allows PGE ‘to interconnect multiple data center customers years earlier than initially expected,’ the companies said.”
Oregon, and Portland specifically, is currently a decent-sized datacenter market, though many other states are seeing a more rapid rate of expansion. In the meantime, PGE is ramping up investments in its own infrastructure; however, some of those costs are to mitigate the state’s growing risks for severe wildfires.
Fire risk keeps investors away, but a near-6% yield and single-digit P/E make
Edison International (EIX, 5.9% yield) a classic contrarian setup. One positive legal surprise and this scorched stock could light up. Edison serves more than 15 million customers and generates much of its electricity from renewable sources including solar, wind, and hydro. EIX also has an unconventional second business: a global energy advisory division.
EIX’s forward price-to-earnings (P/E) ratio sits at just 9; that’s less than half the sector. Its price/earnings-to-growth (PEG) ratio of 0.6 signals it’s on sale, too. (Any PEG of less than 1 is considered undervalued.)
Edison is cheap for a reason, but that reason is no secret. While PGE might have wildfire risk, EIX has known wildfire exposure—specifically, it has spent years fighting litigation over wildfire damage and has paid multiple billion-dollar-plus settlements.
Fire Has Repeatedly Burned Edison’s Bottom Line
Edison could still be on the hook for billions more related to the Eaton fires. It looked like EIX was due for some relief in September, when the California Legislature passed SB 254, creating a wildfire fund continuation account that Edison and other state utilities could tap for future wildfires—but the $18 billion figure was weaker than expected, leading S&P Global to lower its ratings on Edison’s various debt issues.
The flip side? EIX is big on renewable energy, its SoCal residential base is huge, it has an otherwise strong balance sheet, and it pays nearly 6%, dwarfing the sector average. Positive surprises about any Eaton liabilities could jolt the stock to life. So, Edison remains a much bigger high-risk, high-reward gamble than the average utility.
Canada’s Brookfield Infrastructure Partners LP (BIP, 4.9% yield) the global toll collector for the AI age—power lines, pipelines and 100+ data centers. BIP blends stable cash flow with growth tailwinds we usually pay tech multiples for.
And BIP’s assets give us two ways to leverage the AI megatrend.
For one, Brookfield boasts 8.6 million electricity and natural-gas connections, 4,500 kilometers of natural gas pipelines, and 83,700 kilometers of electricity transmission lines. But it also has a data segment that includes 312,000 operating towers and rooftop sites, 28,000 kilometers of fiber optic cable and more than 100 datacenter sites.
The problem (or advantage, depending on one’s point of view) of Brookfield is we’re getting a little bit of exposure to a lot of different things. That’s the nature of a conglomerate. But while the assets are infrastructure in nature, it’s not a very defensive stock—the flip side to that is BIP will often give us buyable dips.
However, It’s Not in One Now
Broadly, though, BIP is a well-paying stock that has raised its distribution for 16 consecutive years. I say “distribution” because it’s structured as a master limited partnership. Now, 99.9% of the time, that’s a drawback given that MLPs force us to deal with Form K-1 come tax time, but Brookfield is special—it has a mirror corporate structure, Brookfield Infrastructure Corporation (BIPC), that pays out qualified dividends instead. Alas, those shares only yield about 3.7% right now.
We can get even sweeter yields out of the utility space by investing via closed-end funds (CEFs).
Consider the MEGI NYLI CBRE Global Infrastructure Megatrends Term Fund (MEGI, 10.1% distribution rate), for instance. This mouthful of a fund is somewhat similar to BIP in that it’s not a true utility fund. But we’re still getting a heaping helping—55% of assets are allocated to utility companies such as Essential Utilities (WTRG), PPL Corp. (PPL), and PG&E Corp. (PCE). But we also get double-digit exposure to transportation, communications, and midstream/pipelines. We even get some preferred stock.
And thanks to liberal use of leverage (24% currently), we get a fat double-digit yield.
What we don’t get is much in the way of return.
Even Plain-Vanilla ETFs Have Trounced This Pseudo-Utility Play
Like with Brookfield, this global infrastructure CEF is a little too broad. I hesitate to recommend it here or in my Contrarian Income Report. However, I do keep my eye out for deep discounts on MEGI that we can take advantage of in Dividend Swing Trader. The price is currently just OK—yes, it trades at a decent 7% discount to net asset value (NAV), but that’s not even cheaper than its longer-term average discount of more than 12%.
We get much better utility exposure with the Gabelli Utility Trust (GUT, 10.4% distribution rate). This still isn’t a pure-play utility-sector fund, but now we’re at close to 70% utilities (including EIX and POR), and another 15% or so in utility-esque telecom stocks like Deutsche Telekom AG (DTEGY) and Vodafone Group (VOD).
Long-term, GUT has been much more competitive with rank-and-file sector ETFs, though its moderately levered nature (15%) and exposure to other sectors has made it more volatile over time. So, like with MEGI, our best bet is to be patient and pounce on dips.
Gabelli’s Fund Trails Long-Term, But Timing Is Key to Outperformance
But it’s almost a foregone conclusion we’ll never get truly bargain prices on GUT. Shares currently trade at a wild 83% premium to NAV, which is somehow a smidge cheaper than its long-term average premium of around 90%. The cheapest it has traded over the past year or so is at a 50% premium to NAV.
Wall Street chases AI stocks that might go higher. We’ll take the utilities that power them—and collect a sure 10.4% while we wait.
With the UK and US stock markets reaching record highs in 2025, warnings are emerging of an incoming correction, or maybe even a full-blown crash. And one of the latest calls for caution has come from Jamie Dimon, the CEO of America’s largest bank, JP Morgan Chase.
But when is this house of cards expected to come crashing down?
The next crash
Timing the market’s hard. And even an investor as successful as Dimon noted he’s unable to accurately predict what will happen next.
As such, his projected timeline for a potential market correction or crash is pretty vast, spanning anywhere from within the next six months (by April 2026) all the way out to two years (October 2027).
And that seems to match the rhetoric of a growing number of institutional asset managers who have begun advising clients to be more cautious.
For example, Trevor Greetham, portfolio manager at Royal London Asset Management, said he remains bullish on the long-term potential of US stocks. But with rising short-term uncertainty, investors should look to rebalance and avoid being too concentrated in US stocks in case the ‘bubble’ does indeed burst.
What now?
Despite the warnings coming from expert investing minds, it’s important to highlight that a stock market correction, or even crash, may not actually happen.
But let’s assume the worst and say that a downturn’s coming. What can investors do to prepare?
One of the best tactics is to do is what Greetham and Dimon have hinted at diversify. There are plenty of opportunities in defensive sectors like healthcare today that help mitigate the impact of sudden, unexpected volatility.
Take AstraZeneca (LSE:AZN) as a prime example that’s worth considering.
Even during an economic meltdown, demand for life-saving medicines doesn’t disappear, and the business has historically proven to be quite resilient. And with an impressive pipeline of late-stage drug candidates inching closer to reaching the market, the business could be primed to thrive for many years to come. That’s why I think nervous investors may want to take a closer look.
Of course, even defensive businesses aren’t without their risks.
The bottom line
The stock market will crash again. But just when is unknowable, and even Dimon’s forecast could be wrong with the current bull market continuing for many years to come.
Nevertheless, by preparing for the worst and hunting down terrific stocks to buy when prices do fall, investors can position their portfolios to deliver jaw-dropping returns over the long run.
Two different portfolios, two different ways to make money. Whilst history doesn’t always repeat but it often rhymes, TMPL whilst still high risk is lower risk compared to MNL.
Pair trading is a trade where you split your capital between a higher risk and a lower risk share, whilst still maintaining a blended yield of 7% which doubles your income every ten years.
You hope that if you time the market correctly the higher risk share increases in value which you can then use to accelerate your Snowball.
Two to consider who have recently changed their dividend policy.
TEMPLE BAR INVESTMENT TRUST Plc TMPL
Dividend
The Trust’s strong revenue performance was again in evidence, with an increase in revenue earnings per share of c.12.3% compared to the first half of the previous financial year. This has enabled your Board to declare an increased second interim dividend of 3.75 pence per share (2024: second interim dividend of 2.75 pence per share). The second interim dividend will be payable on 26 September 2025 to shareholders on the register of members on 22 August 2025. The associated ex-dividend date is 21 August 2025. This follows the payment of a first interim dividend of 3.75 pence per share on 27 June 2025.
As explained in the Company’s most recent Annual Report and supported by shareholders at this year’s Annual General Meeting, the Company’s dividend has recently been altered to see the Company’s progressive revenue-covered dividend enhanced by the payment of an additional 0.75 pence per quarter funded from capital. This has raised the prospective dividend yield on the Company’s shares to c. 4.4%, higher than the average dividend yield of the FTSE All Share which at the time of writing is 3.4%.
Manchester & London Investment Trust plc (the “Company”) MNL
Enhanced Dividend Policy
On 24 September 2025 the Company announced it would be pausing on-market share buybacks because the aggregate proportion of the Company’s voting power held by the public (as that term is used in section 446 of the Corporation Tax Act 2010) is now close to the minimum 35 per cent threshold. The Company paid and/or proposed total dividends last financial year of 28p per Share split between special dividends and ordinary dividends.
Some shareholders have expressed their view to the Manager that the pause of share buybacks means that total capital returns via dividends and buybacks to shareholders will hence reduce.
We have listened and the Company would like to announce that it intends to pay at least 40p per share per annum ordinary dividend for the next five years (representing an Annual Yield of 5.01 per cent based on the closing share price of 798p on 22 October 2025) even if a mechanism is found and executed that allowed share buybacks to continue.
Dan Wright, Chairman of the Company, said:
“In essence, this makes Manchester & London a unique fund on the London Market that is both exposed to global growth and the opportunities of the Era of Artificial Intelligence, whilst also paying an attractive dividend income which can be relied upon for, at least, the next five years.”
MNL has a wide spread which you can normally deal within that is until the brown stuff hits the fan.
I’ll update some research on both companies, when I have the time.
This is a non-independent marketing communication commissioned by Schroder Investment Management. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
From China’s silk to Indonesian islands’ spices, the continent of Asia has always been important to the global economy. Early empires tended to look eastward to Asia first; even Christopher Columbus’s discovery of the Americas happened in search of a westward route to India, China, and the Spice Islands.
Today, we’ve lived through decades of growing US exceptionalism that has led to American companies accounting for 63p of every £1 invested in the FTSE All-World Index, as of 30/09/2025.
Yet, Asia’s influence on the global economy has remained and is well highlighted today: Asia accounts for 31% of global GDP, according to the OECD. Despite the US’s dominance of major indices, Asia is also now home to 55% of the world’s listed companies by number and accounts for 27% of global market capitalisation.
Its public markets are thriving, too, with the number of listed companies in Asia having almost doubled to c. 29,000 between 2000 and 2024. Indeed, while the stock of publicly listed companies in developed markets continued to shrink considerably in the past 25 years, Asian markets have grown, as you can see from the chart below.
Asian markets are thriving
Source: OECD
Despite this, investors are underexposed to Asia, in our view, preferring instead to have either a home bias, by being overweight the UK, or following what worked over the past 15 years, and focusing overly on the US stock market.
Asia is a dynamic and thriving region that remains under-represented, even in world indices. Despite being 27% of total global market capitalisation, Asia accounts for just 12.6% of the FTSE All-World Index, with Japan adding an extra 5.7%.
We believe that there are plenty of compelling reasons, which we will outline below, why Asia deserves a significant allocation in investors’ portfolios.
Why invest in Asia?
A growing region
As demonstrated already, Asia has plenty of momentum. By 2040, the consultancy McKinsey believes that Asia could contribute 42% of global GDP, be home to 60% of the Fortune Global 500 companies, and account for 55% of the world’s total workforce.
In addition, populations around the world are ageing rapidly, but the problem is generally much less acute in Asia as a whole than in Western countries. Indeed, McKinsey expects Asia to be home to more than half the population aged 18 to 24 and account for two-thirds of the global middle class by 2030.
McKinsey sees Asia’s new consumer class as “wealthier, more digitally savvy and as having a penchant for luxury goods”. Given this, Asian firms have a large and growing consumer base that is increasingly seeking out domestic brands for some of their luxuries such as coffee chains, cosmetics brands, and apparel sellers.
Asian companies have also become embedded as key players within areas such as digital services, fintech, healthcare, advanced manufacturing, clean energy, and, most recently, artificial intelligence (AI). Indeed, Asia accounted for 75% of AI patents globally in 2022, according to a report by Stanford University.
These are just some of the attractions driving Asian growth, but there are more from an investment perspective, which we’ll touch on below.
Uncorrelated growth and returns
One clear appeal is Asia’s lower correlation with the West, whether that’s relative to GDP growth rates or stock market performance.
Asian economies have and are expected to grow much faster than their developed counterparts. According to the IMF, the Asia and Pacific region, which includes the main economies of Japan, China and India, is expected to see real GDP growth of 3.9% in 2025. By contrast, North America is expected to see real GDP growth of 1.6% and Europe 1.3% in 2025.
In terms of investments, Asian markets tend to exhibit much lower correlations than developed markets. Indeed, as you can see below, Asia-related investment trust sectors have been less correlated with the FTSE All-World Index in the ten and five years to 09/09/2025, with China/Greater China and India/Indian Subcontinent exhibiting the lowest correlation over both of those timeframes.
Equity correlations
Source: FE fundinfo
Looking for assets that are less correlated with global equities is a good way of achieving diversification within one’s portfolio. That’s especially important at a time when the largest eight American companies account for c. 22% of the (4,220-company-strong) FTSE All-World Index (as at 29/08/2025).
In addition, given that a weaker US dollar is a key aim of the current US administration, getting exposure to other currencies, particularly those in Asia, which should benefit from US interest rate cuts and a weak US dollar, is also important.
Cheap valuations
We briefly touched on the US exceptionalism that has driven global stock markets over the past 15 years, largely leaving most other regions in the dust. Asia is no different.
Low valuations
Source: Schroders, FactSet, MSCI, as at 31/08/2025
This extreme divergence has left Asian markets sitting on attractive valuations, both in absolute terms as well as relative to other markets.
Whereas the MSCI USA Index was trading on a forward price-to-earnings (PE) ratio of 23x on 29/08/2025, and a price-to-book (PB) ratio of 5.6x, the MSCI AC Asia Pacific ex Japan Index was on a forward PE of 16x and a PB of 2.1x.
These valuations are in a similar ballpark to the MSCI Europe Index, where the forward PE was 15x and the PB was 2.3x. Japan, by contrast, was slightly more expensive, at 16x on a forward PE ratio, but cheaper, at 1.7x, on a PB ratio.
Long-term outperformance
Despite this recent underperformance and low valuations, over longer timeframes, Asia has performed slightly better than even the US. Between the start of 2001 to 01/09/2025, for instance, the MSCI AC Asia Pacific ex Japan Index has returned over 700%, versus the MSCI USA’s 650% return, in sterling terms.
Many experts now believe that the current valuations mean that Asia could re-establish its superior performance versus the US – and other regions – over the next decade or so, as seen below.
Schroders forecasts US equities to return 5.4% per year in local currency terms over the next ten years, whereas emerging markets are expected to return 9.4% and Japan is expected to return 8.8% per year in local currency terms.
High potential
Source: Schroders
Unlocking value in Japan
Corporate reform is emerging as one of the most powerful drivers of Asian equity markets. Governments and regulators are pushing companies to improve transparency, raise governance standards, and put shareholder value at the heart of corporate strategy first. This is unlocking value in markets long held back by opaque structures, low returns on equity, and poor capital allocation.
Japan has led the way, with the Tokyo Stock Exchange and regulators forcing companies to unwind cross-holdings, increase return on equity and improve the independence of the board. The results speak for themselves, with a record ¥20 trillion of share repurchases in 2024 and ¥60 trillion returned to shareholders in dividends.
However, almost half of Japanese companies remain in a net cash position, according to SMBC Nikko, compared to less than 20% in North America and Europe. This has already prompted corporations to go beyond regulatory requirements and proactively deploy capital more efficiently, through US acquisitions, investment in AI capabilities, and returning cash to shareholders.
Japan’s economic revival is also being fuelled by shifting household dynamics, with households holding a staggering $14 trillion in financial assets, according to the JSDA (Japan Securities Dealers Association). As the chart below shows, more than half of household assets remain in cash-based holdings, a legacy of the caution towards investing that took root during Japan’s “lost decade”.
Japan has a large pool of cash savings to deploy
Source: Japan Securities Dealers Association, Fact Book 2024, as at 31/12/2024
The expanded NISA (Nippon Individual Savings Account) tax-free investment scheme has already boosted investment inflows by nearly 20% in its first three months, highlighting growing public engagement with asset management.
In addition, the strongest spring wage negotiations (Shuntō) in three decades are increasing disposable income and consumer confidence alike. The redeployment of cash into both consumption and financial assets marks a key step in Japan’s long-awaited transition from a deflationary mindset to sustainable growth and investment.
Corporate governance reform is one of the primary growth drivers identified by Masaki Taketsume, manager ofSchroder Japan (SJG). There has been a steady improvement in return on equity, alongside record highs in dividends and share buybacks, but Masaki sees further scope for improvement.
Masaki focuses on company-specific catalysts, such as restructuring, M&A and capital allocation changes to drive returns. This has led to an overweight in small and mid caps, where valuations are more attractive than in larger peers, and in domestically focused companies that are less exposed to global trade and currency swings, and are well-placed to tap into rising consumer spending.
The trust’s returns are testament to the value of an active approach in Japan, delivering an annualised share price total return of 15% over the last five years, beating the 9% return from the TOPIX (as at 31/08/2025). SJG also offers a useful income stream, with a current dividend yield of just under 4%.
Strong income credentials
Asia may have flown under the radar for income-seekers, but a thriving dividend culture has put the region on a par with traditional equity markets. As the chart below shows, the yield for the MSCI AC Asia Pacific ex Japan Index isn’t far behind the UK and Europe ex UK, while countries such as Indonesia, Malaysia, and Hong Kong offer even higher payouts.
Asia offers an attractive income stream
Source: MSCI factsheets (as at 30/09/2025)
Asia’s income story is also one of resilience. Payout ratios remain lower than in the UK and Europe, leaving headroom if earnings fall, while net gearing is also lower. Sector exposure is also broad, with financials and information technology accounting for much of the dividend base.
Schroder Oriental Income (SOI)aims to capture the combination of income and growth in Asian equity markets. The trust currently offers a yield of almost 4% and is the highest-yielding Asian fund on the AIC Next Generation of Dividend Heroes list, just one year away from achieving full status with 20 consecutive annual dividend increases.
Manager Richard Sennitt focuses on quality rather than chasing the highest-yielding companies, selecting companies with strong governance and the potential for both income and capital appreciation. This approach generates a high, natural income and avoids reliance on enhanced distribution policies used by some peers.
On the growth side, SOI offers exposure to powerful structural themes, from Taiwan’s world-leading semiconductor industry to the growing role of Singapore and Hong Kong as financial hubs. Its notable underweight to China also offers a differentiated option for investors seeking to limit exposure to the country’s ongoing macroeconomic challenges.
This balanced approach has delivered a ten-year share price return of 170%, reinforcing the trust’s ability to combine a dependable income stream with exposure to Asia’s long-term growth story.
A measured approach
While the income story within Asia is an important and understated point, Asia’s real engine is growth: Asia accounts for 82% of the world’s growth companies by global market capitalisation.
That said, this growth does come with big moves both on the upside and the downside.
While Asia is a predominantly growth market, it can also be volatile. To combat this, Schroder Asian Total Return (ATR) provides investors with a vehicle able to take advantage of the exciting growth opportunities of the Asian market while seeking to protect capital.
Managers Robin Parbrook and King Fuei Lee employ a sophisticated strategy that combines bottom-up stock selection, aimed at identifying high-quality companies able to capture the region’s growth potential, along with a top-down overlay to help mitigate downside risk.
The portfolio is made up of 40 to 70 companies with sound balance sheets, professional management teams, and capital allocation policies that are aligned with the interests of minority shareholders.
As ATR has no formal benchmark, Robin and King Fuei are agnostic to the trust’s reference index, the MSCI AC Asia Pacific ex Japan, particularly when it comes to positioning. Instead, they focus on finding the best-quality franchises in the region that they believe can outperform throughout the cycle, and judging them on their own credentials.
ATR’s hedging strategies, built using an in-house quantitative model, are used to identify risks on a country or regional basis. If any risks are detected, the managers will use derivatives such as index futures and options to provide some downside protection to the overall portfolio.
This tried and tested approach has been proven over the 17 years Robin and King Fuei have been working together on the strategy, which includes 12 years on ATR. Indeed, ATR has outperformed the MSCI AC Asia Pacific ex Japan in seven of the past nine full calendar years, with an average outperformance of 6.6 percentage points. The trust was awarded a Kepler Growth Rating for 2025.
Going for growth
Asia’s diversity presents a wealth of opportunities for active stock pickers able to uncover the most compelling opportunities across the region.Schroder AsiaPacific (SDP) stands out as a core holding for investors looking for pure Asian equity growth, aiming to capture the region’s long-term growth potential with a benchmark-plus mindset.
Given the level of heterogeneity across the region, success requires extensive on-the-ground resources to assess not only the macroeconomic and political backdrop in each country, but also the broader corporate ecosystem, from supply chains to competitive positioning.
The trust benefits from three decades of experience navigating Asian markets across a range of market cycles. Managers Abbas Barkhordar and Richard Sennitt are bottom-up stock pickers but remain mindful of broader macroeconomic and geopolitical dynamics.
SDP provides exposure to a diversified range of local and global drivers, providing resilience across different economic and political backdrops. A core focus is the world-class technology leaders in Taiwan and Korea, with SDP being an early investor in semiconductor giant TSMC and consumer electronics firm Samsung. Another export-focused driver is the China +1 re-shoring of global supply chains into ASEAN countries such as Vietnam and the Philippines.
This is balanced with exposure to domestic trends, including the fast-growing financial services sectors in India and the Philippines, as well as exposure to the companies benefitting from the growth of Singapore and Hong Kong as regional wealth management hubs.
One of the benefits of active management is the ability to tilt the portfolio to the most compelling opportunities. Earlier this year, the managers added exposure during the tariff-driven dips, while trimming positions where AI enthusiasm had pushed valuations above fundamentals. The trust is underweight to China, reflecting structural concerns, as well as being selective in India, given valuations.
Why invest in Asia through investment trusts?
Retail investors often face barriers when trying to access Asian equities directly. Many mainstream UK investment platforms offer limited access beyond developed markets such as Australia, Japan or Korea, while minimum purchase order sizes are high, as are trading costs due to foreign exchange and transaction fees.
Aside from that, doing your own due diligence can be very challenging, as financial reporting requirements tend to be considerably less onerous than in the UK and US, and documents are often not available in English.
Investment trusts democratise access to Asia by providing one-stop shops for diversified exposure to the region. Managers are rarely tied to their benchmark indices, and there are no liquidity issues, so they can provide access to smaller companies within the region, too.
Final thoughts
Columbus may have set out to find an alternative route to Asia, which was then the centre of world trade, but he ended up stumbling across the Americas, part of which, as it would turn out, went on to become the economic powerhouse of the future.
With political risks now dominating the agenda in US discourse and the potential for AI hype to create a monumental bubble in asset prices across the Atlantic, attention may start to turn eastward in search of alternative growth opportunities.
Asia has a thriving and dynamic tech sector, complete with chipmaking capabilities, trading at a much less exorbitant price tag than Silicon Valley, providing a buffer against the excesses of the booming US market and geographic diversification to portfolios.
Schroders’ long-standing presence in Asia underpins its edge in navigating these diverse markets. With over 50 years’ experience in the region and a deeply embedded network of on-the-ground investment teams, the firm combines local insight with global perspective, enabling managers to identify the most compelling opportunities.
These resources underpin a wide range of investment options for investors seeking Asian exposure, from growth-focused SDP to income-oriented SOI. In addition, SJG offers single-country exposure, while ATR provides a risk-managed option for investors. Collectively, they showcase Schroders’ long-standing commitment to helping investors tap into Asia’s evolving opportunities.
