Fund Profile

Aberdeen Standard Asia Focus 04 February 2019

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by abrdn Asia Focus. 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.

Overview
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Overview

Aberdeen Standard Asia Focus, formerly Aberdeen Asian Smaller Companies, aims to generate long-term capital growth by investing in Asian smaller companies with quality growth characteristics and holding these for the long run.

The trust returned to form last year with strong relative returns, as its focus on quality was rewarded in rough markets. In 2017 the trust had lagged as lower-quality, more speculative companies were bid up and China, a long-term underweight, outperformed. The manager, Hugh Young, believes that the current environment of rising global interest rates and the rolling back of QE is well-suited to his style.

Hugh, one of the most experienced fund managers in the market, was named lead manager in November as a part of an overhaul requested by the board. The number of holdings is being cut and the concentration in the highest-conviction names raised – the name change is intended to highlight this.

Hugh is focused on improving the speed of decision making and sharpening the focus on the strategy, which has served the company well over the long run. The basic strategy has not changed at all, with a focus on quality growth companies which are bought at attractive valuations and held for the long run, and a strong focus on corporate governance (the main reason for the low weighting to mainland China).

The discount has responded to the overhaul and the improving performance, almost halving from its wide point of 17.5% in October to the current level of 9.5%. However, it is worth pointing out that this is still twice as wide as the 4.8% sector average.

The trust yields 1.3%, and while this is not high the track record of dividend growth is strong, with 6.8% compound growth per annum over the past five years. In fact, the trust has managed to grow or maintain its dividend in each year since launch in 1995, except 1997 and 1998, and investors at launch would now be earning a 17p dividend on their initial investment.

Thomas McMahon
Thomas is Investment Trust Research Manager and joined Kepler in April 2018. Previously he was senior analyst at FE Invest, where he was responsible for fund selection for a range of model portfolios. He covered all asset classes over time, but has particular experience with emerging markets and fixed income as well as UK smaller companies funds. He has a degree in Philosophy from Warwick University and is a CFA charterholder.
Kepler View

The revivifying of the portfolio, as well as the greater control taken by Hugh Young, has come at a potentially good time for shareholders in this trust. We share the manager’s view that the market environment looks like it should become much more conducive to his strategy. The era of ultra-low interest rates and QE led to high growth, “story” stocks being bid up to high valuations, and less interest being paid to the more robust, steady earnings growers with longer track records.

With rates in the US significantly higher and QE being unwound, a more quality and valuation sensitive approach is being rewarded. It is therefore no surprise to see a significant narrowing of the discount in this trust in recent months, but we can see no reason it could not narrow further. As a result of the recent changes, the trust’s portfolio is now more concentrated and higher conviction, but has attractive quality characteristics which should be a tailwind for the managers' style.

Bull
Bear
A highly attractive discount relative to peers with an improving performance record
The strategy has led the trust to have long-term underweights to China and technology and if these outperform it will lag
A more concentrated portfolio will increase the ability of the trust to outperform

The experience of the manager is second to none

Continue to Portfolio

Fund History

20 Apr 2022 On the hunt
We review discounts in the investment trust space against a backdrop of harsh conditions...
04 Feb 2022 Fund Analysis
AAS’ board is building on a period of strong performance with crucial improvements to the strategy…
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
28 Jul 2021 Fund Analysis
AAS offers exposure to exciting growth companies in Asia, and has traditionally done very well after global crises…
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…
30 Jun 2021 Inflation – a real threat or hot air?
Two of our analysts ask whether recent high inflation numbers indicate something long-lasting and troubling is happening…
14 Apr 2021 Wide Boys
We review our portfolio of chonky discounts as one star performer hits its target…
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
04 Mar 2021 Slides and Audio: Aberdeen Standard Asia Focus
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 02 March...
04 Feb 2021 Fund Analysis
AAS’s quality approach to Asian small caps saw it outperform after the last two global crises…
24 Sep 2020 Bull in the Chinese market?
The Chinese stock market has been a notable winner thus far in 2020. Should investors stay the course, or take profits?
20 Aug 2020 Fund Analysis
AAS’ high quality portfolio should be robust in a troubled economic environment...
05 Mar 2020 Don't panic: the case for investing in Asia this ISA season
We examine the relationship between stock market and GDP growth, before debating the case for an allocation to Asia...
11 Feb 2020 Fund Analysis
AAS has been reinvigorated following Hugh Young taking more personal control…
21 Aug 2019 All change: a closer look at the AIC's revised sectors
We examine the AIC's revised sector classifications and discuss whether further improvements could be made...
05 Aug 2019 Fund Analysis
Aberdeen Standard Asia Focus (AAS) aims to generate long-term capital growth from a valuation-sensitive approach to Asian smaller companies..
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...
04 Feb 2019 Fund Analysis
The trust returned to form last year with strong relative returns as its focus on quality was rewarded in rough markets...
View all

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