Fund Profile

Aberdeen Smaller Companies Income 25 September 2019


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by abrdn Smaller Companies Income. 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.

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Aberdeen Smaller Companies Income (ASCI) is one of the few small-cap trusts to offer a significant income to investors as well as the growth potential in small caps.

Following the merger of Standard Life and Aberdeen, the trust was taken over by the Standard Life Smaller Companies team in September 2018, since when Abby Glennie, one of the two UK Small Cap managers at Standard Life, has overhauled the approach, bringing it in line with the highly successful Standard Life UK Smaller Companies Trust, with an added income remit.

Over the past few months the team have sold their holdings in preference shares and increased their exposure to growth equities. This has helped performance, which has been strong relative to peers since the team took over. Over the period, starting September 2018, the trust has delivered NAV total returns of -1.2%, in comparison to the Numis SC Plus AIM Ex IT returns of -8.4% and the AIC and IA peer groups returns of -6.5% and -7.9%. This outperformance was partly due to the trust’s strong protection of capital during the correction late in 2018, but also due to the particularly strong rally between January and April.

The process centres around the proprietary screening system (aka The Matrix), developed within SLI prior to the merger. The Matrix helps the team decipher among companies in the universe, looking at multiple financial metrics to come to a final score. Particularly noteworthy is the reduced emphasis on valuation metrics relative to peers, as the team believe that these can be deceptive in the smaller company space.

Alongside capital appreciation, a key focus for the team is generating an income for investors, and the yield is 2.8%. The most recent full year dividend increased by 4.2% from the prior year, and was fully covered by reserves.

Because of the strong performance relative to peers, and continued attractive levels of income, the discount has narrowed over 2019. However, the trust is still on one of the wider discounts in the sector, currently sitting at 13.6%.

Kepler View

As we noted in our recent article 'Rethinking UK Equity Income', UK equity income trusts are highly concentrated in a few big names, which we think is a potential cause for concern for income-seeking investors. Just eight companies make up over the 50% of the yield of the FTSE 100, according to Bloomberg figures, many of which have quite uncertain futures. Although ASCI does yield less than many of the large cap equity income trusts, the yield of 2.8% is potentially interesting, particularly given the prospects for dividend growth, we believe. We think ASCI offers income seekers an attractive opportunity to get a diversifying source of dividends from a smaller companies portfolio with good growth potential.

Furthermore, the company has performed strongly relative to peers since the new team took over and, once sentiment towards markets settles, we believe the discount will narrow given the reputation of the SLI management team of which Abby is a part.

bull bear
Strong start relative to peers in performance terms and an outstanding long-term track record At c. £65m in net assets, the trust will be too small for some wealth managers
A highly attractive discount Sentiment towards the UK remains poor
The trust offers diversification to income-seekers, with relatively few small cap trusts offering a decent yield The OCF is above average given the small size of the trust
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Fund History

26 Jul 2023 Our board and saviour
Boards are proving their value as discounts languish…
18 Jan 2023 Fortune favours the brave
Our research suggests a recession has already been priced into small cap trusts, but risks abound...
02 Dec 2022 Fund Analysis
ASCI offers a differentiated way to invest in UK smaller companies…
21 Mar 2022 Fund Analysis
ASCI offers a growing dividend from a source that could diversify income portfolios…
16 Feb 2022 Perfectly formed
Our research suggests that investment trusts really are a better way to gain exposure to smaller companies…
15 Sep 2021 Bargains galore
We review our discounted opportunities portfolio, with one constituent rallying more than 30% in just two months…
11 Aug 2021 In at the deep end
Does seeking out wider-than-usual discounts help investors systematically outperform in the UK trust space?
14 Jul 2021 Grade inflation
We look at how our discounted opportunities portfolio has done in the first half of the year and update on the performance of our long-term rated funds…
23 Jun 2021 Fund Analysis
ASCI has outperformed over the current managers’ tenure…
02 Jun 2021 Fortune favours the brave (sometimes)
Our research suggests wide discounts often herald high NAV returns too…
14 Apr 2021 Wide Boys
We review our portfolio of chonky discounts as one star performer hits its target…
22 Mar 2021 Results analysis: Aberdeen Smaller Companies Income
Reporting results for the year ending 31 Dec 2020, ASCI remains a solid trust on a significant discount to peers…
09 Dec 2020 Fund Analysis
Aberdeen Smaller Companies Income (ASCI) has generated outperformance since the change of strategy and currently offers a 2.8% yield…
06 Apr 2020 Fund Analysis
ASCI offers investors both capital appreciation and income from a portfolio of high-quality UK smaller companies…
25 Sep 2019 Fund Analysis
Offering income seekers a chance to diversify their source of dividends, ASCI has a portfolio of smaller companies with strong growth potential…
26 Jun 2019 Measure for measure
In the first of a two-part series, we examine the tools investors can use to assess how active a manager actually is…
01 May 2019 Sweet or sour?
Three months in, we check up on the progress of our discount opportunities portfolio...
13 Feb 2019 Sweet treats
The eight trusts with strong prospects, but wide discounts...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
01 Feb 2019 Fund Analysis
Under the watchful eye of a new manager, Aberdeen Smaller Companies Income targets income and capital growth from UK smaller caps...
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