Fund Profile

Aberdeen Standard Asia Focus 04 February 2021


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.

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Aberdeen Standard Asia Focus (AAS) invests in small cap companies in the Asia Pacific region which the managers, Hugh Young and Gabriel Sacks, believe are, or will become, market-leading in their industry or niche. The basic strategy is to identify companies with high quality financials and governance and invest at attractive valuations.

The quality characteristics mean that the companies should be more operationally resilient and, as discussed under Performance, AAS performed very strongly after the 2008 crisis in the long, slow recovery. However, in recent years performance has been more sluggish, with the portfolio behind the MSCI AC Asia ex-Japan Small Cap Index over five years. This was largely due to the trust not keeping up with the sharp rally from the March 2020 lows, even though it outperformed in the initial crash.

As we discuss under Portfolio, since 2018 the weighting to technology and ecommerce has been steadily rising as Hugh and Gabriel have set out to revive the portfolio. AAS owns, the Taiwanese equivalent to Amazon, which trebled in 2020, as well as a number of companies across the hardware and software industries. The portfolio remains balanced across ‘old’ and ‘new’ economy stocks, however, with high weightings to the consumer staples and financials sector too.

Hugh has invested in Asia since the 1980s and draws on the work of a team of analysts/portfolio managers based in the region. Gabriel has been assisting Hugh on AAS since 2018.

After a rally in the markets towards the end of 2020, AAS trades on a discount of 9%, narrower than the five-year average of 13.7% but wider than the average all-cap Asia trust discount of 2.4%.

Kepler View

AAS offers an attractive balance between old and new economy companies. While technology, especially ecommerce, has outperformed hugely since the pandemic, we think a more balanced allocation could be attractive at this time. If the economic recovery from the pandemic proceeds as we hope in 2021, with vaccines rolled out and restrictions eased, then we think technology could underperform in the short run as investors reacquaint themselves with the other growth opportunities in Asia, from financial services to consumer staples to manufacturing.

We also find it interesting that AAS did exceptionally well after the 2008 global crisis, and indeed in the recovery from the 2001 tech bubble bursting. While there are many factors that mean this pattern might not repeat itself (see performance section) we do think the quality strategy may well outperform in the troubled recovery we think we likely see in the coming years. For while optimism abounds about the vaccines, we note that vaccines will take time to roll out, and many economic problems remain to be resolved in the coming years, with weaker companies likely to suffer at the expense of their higher quality competitors as the lagged impacts of recessions work their way through economies.

AAS trades on a narrow discount by recent history but we think this is justified given the brighter outlook, and note it is wider than the all-cap sector. Although large caps have outperformed for the past four years, there is no guarantee this will continue.

Focus on strong balance sheets and operational resilience should serve well in troubled environment
Structural gearing increases the downside risks
Strong secular growth potential in many of the region’s economies
Highly active country allocations, such as the low weight to China, can lead to large under or overperformance at times
Extensive experience and resources in the Asian Equities Team
Asia large cap is in a sustained period of outperformance over small cap
Continue to Portfolio

Fund History

18 Jul 2024 abrdn Asia Focus
Gabriel Sacks
Join this webinar as part of our July online series 'Small caps - take two' hosted by the team at Kepler Trust Intelligence...
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25 Jun 2024 Fund Analysis
The strong performance of AAS, and Asian smaller companies, has gone under the radar…
07 Mar 2024 Asia small cap investing with AAS – Podcast: Trust Issues #26
We talk to Manager Gabriel Sacks about valutions, performance, and more...
30 Nov 2023 Fund Analysis
AAS outperforming its benchmark, which is itself beating large-caps index…
05 Jul 2023 Silk Road Strife
The Asian narrative has been dominated by the India vs China debate, but on which side of the line have investment trust managers fallen?
03 May 2023 Fund Analysis
AAS offers a lower-risk approach to the high-growth potential of Asian smaller companies…
11 Jan 2023 Solving the Rubik’s Cube
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02 Nov 2022 The stability dividend
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11 Oct 2022 Fund Analysis
A further ramp-up towards Chinese stocks is expected after recent policy changes…
20 Apr 2022 On the hunt
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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...
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