Aberdeen New India

ANII is the top-performing Indian trust over the last five years…

Add to watchlist Request a meeting Download View key data

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Aberdeen New India. 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.

Aberdeen New India


Aberdeen New India Investment Trust (ANII) aims to identify Indian companies with high and sustainable earnings, strong balance sheets and good corporate governance and buy them when they are on attractive valuations.

The process leans on the bottom-up research of the Aberdeen Standard Asian equities team, particularly Kristy Fong and James Thom, who have managerial responsibilities for ANII. Their successful stock-picking has led the trust to outperform considerably over the last five years. As we discuss in the Performance section, the trust is the top-performing Indian closed-ended fund over that period, with the lowest volatility and the best performance in down markets.

The team view strong corporate governance as an important characteristic of a quality company, and it is a key issue determining whether they invest or not. Kristy and James believe that giving up these principles for short-term gain could lead to worse losses in the future.

India’s stock market has been weak over the past six months as the economy has absorbed a mini-financial crisis and the impact of government reforms. The quality tilt of ANII has been advantageous, and the managers have been taking the opportunity to top up their highest-conviction picks on cheaper valuations.

With these India-specific reasons and the ongoing coronavirus scare, discounts in the region have drifted out and ANII’s shares trade on a 13.1% discount to NAV.

Kepler View

India is an exciting long-term prospect. The country’s demographics mean there are huge long-term growth opportunities in goods and services serving a growing young population. ANII has many high-quality companies which are plugged into this growth, such as the financials offering bank accounts, mortgages and basic financial products to those who have never had them before.

In the short term, India has been suffering the fallout from a crisis in the non-bank financial sector (which has benefitted ANII’s holdings), and from the short-term impact of a series of government reforms which have good long-term intentions of improving governance, addressing corruption and encouraging financial inclusion. ANII’s quality portfolio should be more resilient to these challenges, while the multi-year perspective Kristy and James take means their eyes should remain on the long-term secular opportunities.

Thanks to these domestic challenges and the ongoing coronavirus pandemic, ANII’s discount has widened out to a highly attractive 13.1%. This is considerably higher than the average of the AIC Global Emerging Markets sector, which is 9.1%. While we accept that single-country funds have their own risks which might warrant a slightly wider discount, we think this is excessive, and that sentiment to the whole region has been weakened by the crisis in China. This is therefore an attractive entry point to ANII for the long term.

Bull Bear
Strong long-term record based on successful stock-picking Does not pay a dividend
Quality approach has provided resilience in weaker markets Gearing can magnify market falls as well as losses
Discount is wide and could be an interesting long-term entry point As a single-country emerging markets fund, it has political risk


Aberdeen New India Investment Trust (ANII) owns a portfolio of high-quality Indian equities selected for the strength of their balance sheets and governance and the sustainability of their earnings. The trust is managed by Kristy Fong and James Thom, who implement the bottom-up approach of the Aberdeen Standard Asian equities team which has led to long-term outperformance in the Indian market. The managers aim to identify the leading companies in their sectors or industries, invest at attractive valuations and hold for the long run.

In terms of financials, a focus on quality means finding companies with high and sustainable returns on equity and strong balance sheets. This means those which have the ability to persistently generate higher-than-average returns over the long run and those which have low levels of debt. Low debt and good cash flows allow for financial flexibility and investment in future growth, which companies with liquidity issues can’t achieve. Good corporate governance is a vital element of a quality company on this view: the managers look for companies which are run in the interests of minority shareholders and which have a track record of prudent capital-allocation decisions – critical if a company is to use the advantage of a strong balance sheet.

The managers are willing to pay a higher valuation for a higher-quality business, which comes through in the historic trend for ANII’s portfolio to be more richly valued than the market. As the table below indicates, this higher valuation is being paid for higher returns from companies which have on aggregate very low levels of debt on their balance sheets, which make them exceptional even in India where debt-to-equity ratios are low by global standards.


P/E 2018
P/E 2019
P/E 2020
Portfolio yield
Debt / Equity
MSCI India

Source: Aberdeen Standard, as at 31/01/2020

As we discuss in more detail in the Performance section, this focus on quality has led to a historical tendency to performing better in falling markets, with ANII having the lowest downside capture of the three specialist Indian trusts over the past five years. ANII also has the lowest volatility of the group, as well as the lowest maximum drawdown – a measure of the largest peak-to-trough loss in an investment.

Stock selection is a cautious, painstaking process which involves detailed fundamental analysis of each candidate company’s fundamentals. The combined analysts/portfolio managers on the Asian equities team insist on meeting management before investing as a way to help assess the quality of corporate governance at each company. They will then meet with the management of each holding at least twice a year once they are invested. The managers are highly engaged as shareholders, and will look to encourage better corporate governance as well as better environmental and social performance (the three aspects of ESG investing). They view this as a crucial part of being a long-term shareholder and enter into positions expecting to own a company for five years or more. By engaging with boards and with management teams, the trust aims to improve the treatment of minority shareholders and therefore unlock value for investors.

The team identify those companies which meet their requirements in terms of quality and then track them until they think there is a reasonable valuation on which to buy them. They tend to raise their investment steadily as their conviction increases and they become more familiar with a company, and will look to add to and cut back their holdings as their valuation changes. This value element also comes through at the trust level through the use of gearing, which is altered as the valuation opportunity in the market changes.

The top ten holdings make up 53% of the portfolio, so it is highly concentrated. That said, so is the index. The MSCI India Index has 54% in the largest ten positions, although the largest company in that market is Reliance Industries, which Kristy and James won’t hold on quality grounds. ANII holds only 39 stocks compared to the 84 in the benchmark. As the table below shows, financials make up some of the highest-conviction positions, including the private-sector banks Kotak Mahindra Bank and HDFC Bank. The latter’s parent company is Housing Development Finance, which is one of India’s largest mortgage lenders.


Weight (%)
Housing Development Finance
Tata Consultancy Services
Kotak Mahindra Bank
Hindustan Unilever
SBI Life Insurance
Ultratech Cement

Source: Aberdeen Standard

These financial positions have been doing well in recent months. India has been suffering the consequences of a crisis in its non-bank financial company (NBFC) sector, which has seen weaker players suffering from higher funding costs and asset-quality problems. ANII’s holdings mentioned above have outperformed thanks to their higher-quality balance sheets. That said, in the managers’ eyes some stocks have been unfairly punished, and they have taken advantage of this perceived weakness to top up. Piramal Enterprises, for example, has some exposure to commercial real estate, but Kristy and James believe it has nimbly adapted and de-risked its balance sheet. The managers took part in a capital raise to see the company through this rough patch.

The importance of financials can be seen in the high absolute weight in the chart below. Although the trust is slightly underweight to the index, sector weights reflect where the managers find stock-specific opportunities rather than reflecting their views on the sector as a whole. Consumer staples (Nestlé, Hindustan Unilever) and information technology (Tata Consultancy Services, Infosys) are the other main areas of exposure. The large underweight to energy is explained by the trust not holding Reliance Industries.


Source: Aberdeen Standard


ANII is the only India specialist trust to have significant levels of structural gearing. Gearing is 5.3%, taken through a two-year credit facility which can be drawn down bit by bit. The full £30m of the facility would be worth roughly 9% of net assets at the trust’s current size. Gearing levels are left to the discretion of the manager within limits set by the board, and these limits take market conditions into consideration. Kristy and James take a cautious attitude to gearing, aiming to take advantage of valuation opportunities when they arise. Therefore, having arranged the gearing facility in July 2018, in the fourth quarter of that year they took advantage of the sell-off in Asian markets to invest in attractive stocks at lower valuations. Gearing has remained in the mid-single digits since then.


ANII has outperformed its benchmark handsomely over five years, with the focus on resilient, high-quality companies with strong balance sheets helping it to outperform on the downside. It has returned 46.2% over five years in NAV total return terms, compared to 35.4% from the iShares MSCI India ETF which passively tracks the benchmark, as the chart below shows. The index itself did considerably better at 41.4%, with replication issues, fees and the tendency to trade on a discount to NAV eroding ETF returns, although this is still considerably below ANII’s performance.


Source: Morningstar

Over this period ANII has the best upside/downside capture ratio of the three Indian trusts and is the only one to have a positive ratio, indicating it has been more exposed to rising markets than to falling markets. It is also the only one to have a negative downside capture ratio, indicating that it has consistently lost less than the index in falling markets.

The chart below shows calendar-year returns of ANII, the MSCI India Index and the AIC Global Emerging Markets sector. The general pattern is outperformance in falling markets – as happened in 2011, 2013 and 2018 – with slightly more mixed results in rising markets. Although the trust outperformed in each of 2014, 2015 and 2016, in 2017 it only just failed to keep pace in a sharply rising market.


Source: Morningstar

In the calendar year 2019, one stock-selection decision particularly hurt the trust: not holding Reliance Industries, the largest company in the market. Reliance is over 10% of the MSCI India Index by market cap, and so Kristy and James’s decision not to own it hurt in a year in which Reliance outperformed considerably, although stock selection elsewhere mitigated this somewhat. When we caught up with Kristy recently, she reaffirmed the pair’s decision not to hold the stock was due to concerns about the quality of management. Kristy believes the debt-driven expansion of the company from a petrochemicals enterprise to a telecommunications and retail business has been aggressively done, and done without an eye to shareholder returns. Kristy and James acknowledge the work the company is doing to try to deleverage the balance sheet, and they are monitoring progress to assess whether Reliance’s capital allocation and governance improve.

A better start to 2020 means that over the past year investors in ANII are slightly ahead of those who have bought a passive fund. NAV total returns have been 9.9% compared to 9.3% for the ETF. The index itself is up 10.2%.


Source: Morningstar


The company is managed for capital growth and has not paid a dividend since 2005. Income is used to pay expenses and is offset by past tax losses.


The trust is run by the Aberdeen Standard Asian equities team which is based in Singapore. They take a team-based approach which means they aim to build consensus on their stock picks across the region. However, there are two team members with special responsibility for this portfolio: Kristy Fong and James Thom. Kristy and James are the key decision-makers regarding what goes into the trust and how it is managed on a day-to-day basis, using the stock research of the wider team. The Asian equities team are led by Flavia Cheong from Singapore, with her deputy Kwok Chern-Yeh being based in Tokyo. The team place great importance on corporate governance and engaging with companies to improve how they treat minority shareholders, as well as on quality growth characteristics and strong management teams.


ANII’s shares trade on a 13.1% discount to NAV, wider than the 12% weighted average of the four India specialist trusts. The only one on a wider discount is the mid-cap specialist India Capital Growth. ANII’s discount has been moving in line with the Indian equity market over the past two years. After the market (MSCI India) peaked in July 2019, ANII’s discount has drifted out while the stock market has been weak. As the chart below indicates, the rating of the average AIC Global Emerging Markets trust has held up over the period.


Source: Morningstar

The board has the authority to buy back shares to control the discount, and has committed to doing so when it believes this would be in the best interest of shareholders (while paying regard to the overall size of the trust’s portfolio). In recent years the board has preferred to rely on performance and marketing to close the discount, but since August 2019 it has been conducting regular buybacks. There is also an annual continuation vote which has been held each year since 2005.


The OCF is 1.17%, which compares to a weighted average of the four India specialist trusts of 1.14%. The management fee is 0.9% on the first £350m of net assets. Net assets are currently £329m, but when they rise above £350m they will be charged at 0.75%. There is no performance fee. The KID RIY is 1.39%, which compares to a weighted average of 1.63% for the Indian trusts, although methodologies can vary.


The Asian equities team at Aberdeen Standard believe ESG and sustainability issues are intrinsically linked to the ‘quality’ of a company and that sustainability in the broader sense is important for the sustainability of a company’s earnings. In the past, Aberdeen Standard (and Aberdeen Asset Management, long before the 2017 merger) was a standard bearer when it came to corporate governance. It has always placed great importance on the incentives and attitudes of management to minority shareholders. In recent years, the Aberdeen Standard Asian equities team have integrated environmental and social issues more into their assessments. Team members generate their own ESG ratings for candidate stocks and also consider the ratings of external providers in order to understand the difference. Once invested, the team view themselves as long-term partners of management, and encourage companies to improve their behaviour vis-à-vis shareholders and stakeholders more widely.

As an additional resource, the team are also able to receive inputs from Aberdeen Standard analysts based in Edinburgh who consider top-down global issues such as plastic use and climate change. There are also three dedicated ESG analysts sitting with the team in Singapore who cover the Asian region, and their task is to consider what progress is possible and desirable within the regional context.

Fund History


This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.


Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
Please enter a valid password
Please enter a valid email address
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
Please enter a company name
Please enter a location name
Please choose an option
Please enter a platform
Please choose an option
Please enter a trust
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
Please select an option
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
Please enter your first name
Please enter your last name
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
Please enter a valid password
Please enter a valid password
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.