Fund Profile

abrdn Diversified Income & Growth 21 March 2023

Disclaimer

This is a non-independent marketing communication commissioned by abrdn. 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’s significant discount may present a good opportunity to access a diverse range of high-quality, good value investment opportunities…
Overview

Aberdeen Diversified Income and Growth (LON:ADIG) owns a multi-asset portfolio which is designed to generate a dependable and consistent income as well as capital growth. Following a strategic review in Q4 2020, abrdn’s head of Private Market Solutions, Nalaka De Silva, took over as lead portfolio manager as private assets became the core focus of the investment strategy, and this currently makes up over 50% of the asset allocation, as discussed in Portfolio.

Tail-end effects of the pandemic, a shift in macroeconomic conditions, and elevated geopolitical tensions have meant Nalaka has maintained a more defensive stance in recent months. He has continued to rebalance out of riskier positions in the listed equities allocation into assets that can provide more sustainable cash flows and inflation protection. This includes a significant allocation to real assets and infrastructure, in addition to sources of income that are less correlated to the cyclicality of equity markets. Investing in funds as well as directly in assets helps maintain diversification and reduce concentration risks to leave ADIG less exposed to short-term market noise. Additionally, Nalaka has been building up cash in recent months to be able to take advantage of opportunities as they arise. This has all contributed to attractive risk/return characteristics in recent months (see Performance).

ADIG offers a high Dividend yield of over 6.7% on its share price. Despite this and the strong recent performance, ADIG continues to trade at a wide Discount, which at the time of writing is 26.3%. The board is no longer targeting a 5% discount, which increases the potential for discount volatility in future. It does however mean that Nalaka will have even more cash available to invest into new opportunities as they arise.

Kepler View

As the Portfolio reaches its long-term target private markets’ allocation, we believe ADIG can offer investors a valuable form of diversification through exposures to areas of the market not typically accessible to private investors. Given the trust’s high allocation to private markets, real assets, and infrastructure investments, we think ADIG is more likely to suit investors with a long-time horizon that will allow the investment cases to play out.

In the short term, the significant cash weighting Nalaka has built up should allow the team to act quickly should further opportunities present themselves. This cash could be put to work in pursuit of capital growth or indeed of income, building on the very high Dividend yield ADIG offers, which at 6.7% compares favourably to that available on equities. For example, the UK equity income sector’s average yield is just 4.5%.

We think the wide Discount of 26.3% reflects the fact that it has taken time for the new strategy to cement itself. This may provide investors with an opportune entry point if the portfolio can build up a good medium-term track record under the new strategy, building on what have been credible short-term results.

Bull

  • Offers access to a deep pool of private assets through a manager with specialist knowledge
  • Very attractive dividend yield backed up by revenue reserves if not fully covered
  • Defensive strategy positioned to protect in a high inflationary environment

Bear

  • Performance may lag during periods of equity market strength
  • No discount control mechanism may lead to discount volatility
  • High OCF compared to peers
Continue to Portfolio

Fund History

26 Jul 2023 Our board and saviour
Boards are proving their value as discounts languish…
21 Mar 2023 Fund Analysis
ADIG’s significant discount may present a good opportunity to access a diverse range of high-quality, good value investment opportunities…
19 Oct 2022 Gimme shelter
Our analysts examine safe havens and defensive strategies as we endure the market's 19th Nervous Breakdown...
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...
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...
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...
View all

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
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
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
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
{{item.msg}}
Please select an option
{{item.msg}}
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
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
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.