Fund Profile

Aberdeen Diversified Income & Growth 29 July 2022

Disclaimer

This is a non-independent marketing communication commissioned by Aberdeen Standard Investments. 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
ADIG offers investors an unconstrained multi-asset portfolio, including hard-to-access private market investments sourced through abrdn’s origination platform...
Overview

Aberdeen Diversified Income & Growth (ADIG) offers investors an unconstrained multi-asset portfolio, including a private market allocation. ADIG has access to the best ideas from abrdn’s teams across a range of assets including real assets, fixed income and credit, and equities, across both public and private markets. The trust targets dependable income and growth opportunities with a low correlation to equity markets.

In Q4 2020, a major strategic review resulted in an increasing focus on private assets, intending to increase the diversification on offer and improve returns. ADIG invests mainly in funds, and many of the underlying investments are otherwise unavailable to, or hard to, access by the typical mass-market investor.

abrdn’s Head of Private Markets Solutions, Nalaka De Silva, has managed the trust since the strategic review, alongside Multi-Asset & Investment Solutions Investment Director, Jennifer Mernagh and Private Market Solutions Investment Manager Nic Baddeley. Together, they have built a portfolio intended to provide investors an opportunity to generate capital appreciation as well as a sustainable Dividend.

The investment team is able to draw upon abrdn’s wider multi-asset and private market capabilities in order to leverage investment strategy research, access to investment ideas (particularly in private markets), and portfolio construction tools, which should enable robust asset allocation.

Over the course of this year, ADIG’s asset allocation transition has come closer to reflecting the long-term target of 55% invested into private market investments (currently c. 48%). This has increased the portfolio’s allocations to real assets offering an element of inflation protection and uncorrelated cash flow generation. This has proved positive for Performance since the strategic review and indeed over the past 12 months, as evidenced through stable NAV performance over an extremely volatile period for markets globally.

Kepler View

ADIG has seen some instability and uncertainty in recent years. However, following the strategic review performance has improved, and we think the trust now offers a genuinely diversified, resilient portfolio tilted towards real assets, with a focus on infrastructure, in addition to alternative real estate and royalties, which can provide a degree of inflation protection and sources of uncorrelated income. Such investments tend to benefit from the certainty of holding long-term capital and longer-term pricing, which are less reactive to short-term market movements and subsequently lead to reduced levels of price volatility for the overall portfolio. This may make ADIG more appropriate for the more cautious investor who can commit capital for a longer holding period, although it is important to note the strategy may underperform indexes made up of listed equities in high-growth environments. As this period of significant change for the trust comes to an end and the discount to NAV remains sticky, we believe this may provide an opportunity for investors to re-assess the investment case and provide a justifiable entry opportunity.

One of ADIG’s attractions is that it provides a genuine source of diversification and less correlated returns through its significant allocations to infrastructure with contracted cash flows, in addition to other privately held assets. This does reduce transparency around valuations and operational progress, but abrdn’s specialist private markets capabilities mean Nalaka, Jennifer and Nic are in a good position to exploit opportunities in these markets.

Bull

  • Significant private markets exposure offers investors a diverse strategy, less correlated to conventional equity market exposure
  • Resilient NAV and share price in a challenging environment coupled with an attractive yield with a substantial revenue reserve should make an attractive combination for a long-term investor.
  • ADIG has access to abrdn’s extensive network of industry professionals, especially important when originating private market investment opportunities

Bear

  • Relatively new strategy with 3 significant management changes in the past 5 years. Investors need to be willing to invest capital over the longer term
  • Volatility of the discount to NAV may lead to uncertainty around the shareholder value and potential selling levels
  • ADIG has a modest level of gearing which will magnify the extent of losses if investments fall in value
Continue to Portfolio

Fund History

29 Jul 2022 Fund Analysis
ADIG offers investors an unconstrained multi-asset portfolio, including hard-to-access private market investments sourced through abrdn’s origination platform...
13 Jul 2022 Ready player one
We wonder where, if anywhere, should investors look for returns after a tumultuous first half of the year…
06 Jul 2022 A game of two halves
In the second article of our series on the AIC Flexible Investment sector we see how performance has stacked up during two years when markets were poles apart...
01 Oct 2020 Alternatives for Income Investors
Slides and audio from our event focused on alternative routes to a reliable income…
30 Sep 2020 Fund Analysis
ADIG offers a high yield from a portfolio of alternative assets...
30 Sep 2020 Slides and Audio: Aberdeen Diversified Income & Growth
View the presentation and listen to the audio from our 'Alternatives for Income Investors' event on 29 September...
20 Aug 2020 Alternatives for income investors
In a world where dividend are under unprecedented pressure, our income focused online event in September should provide serious food for thought…
30 Jan 2019 The Annuity Portfolio
We reveal our investment trust picks for a high income ...
25 Jul 2018 The Evergreen Annuity Portfolio
Our Evergreen Annuity Portfolio was set up to provide a high income, rising at least in line with inflation...
24 Jan 2018 Seeing the wood for the trees...
Our model portfolio designed as an annuity alternative is struggling to keep pace with inflation, we review the latest from the constituents…
20 Nov 2017 Under pressure
Our model portfolio designed as an annuity alternative is coping so far, but may struggle to keep pace with inflation at this rate…
20 Nov 2017 Fund Analysis
A very broadly diversified portfolio which aims to generate an “attractive” yield though a low volatility multi-asset approach
27 Sep 2017 Fund Analysis
We examine this very broadly diversified multi-asset fund, a constituent of our model portfolio, now that the dust has settled...
11 Oct 2016 Fund Analysis
This research has now been updated....
13 Oct 2015 The Evergreen Annuity Portfolio
Five 'all season' investments which will produce a sustained high income without eating into capital...
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