Fund Profile

Aberdeen Standard Asia Focus 04 February 2022

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
AAS’ board is building on a period of strong performance with crucial improvements to the strategy…
Overview

Aberdeen Standard Asia Focus (AAS) has generated excellent long-term returns by investing in smaller companies listed in Asia. The trust has been managed to the same basic strategy by the same team for over two decades, but the board has been active in seeking to revivify and revamp the approach in recent years, which has helped deliver strong recent Performance.

Shareholders have just approved another series of tweaks aimed at improving performance potential and increasing demand for the shares. These include a new performance-linked five-year tender offer to address the Discount, a share split to increase the fungibility of the shares, and a fee cut.

One significant change is to remove the strict market cap limit on new investments. As Asian markets have developed, the limit has been raised multiple times and having a strict region-wide limit has made it hard to invest in China. The managers will have much more freedom to invest in that country in future, and they tell us they expect the weighting to increase in recent months, with the recent sell-off in the country generating opportunities (see Portfolio).

AAS will also pay a more significant Dividend in future, with the board committing to double the 2021 payout in the current 2022 financial year. On the current share price the proposed dividend would amount to a 2.2% yield.

Hugh Young has managed this portfolio since it launched in 1995, although he was named lead manager only in 2017, as there is a strong team-based approach taken by the abrdn Asian Equities team to their portfolios. Considering the expected increase to North Asia and succession planning, Flavia Cheong is being named co-lead manager.

Kepler View

AAS has been through a process of change in recent years which we think has left it in a good place to continue its long-term track record of success. The recent changes follow a series of adjustments in 2018 which have led to a more concentrated portfolio with greater exposure to high quality technology stocks. These changes have already borne fruit, with AAS performing very well in 2021. The key changes for us are to the investment remit, in particular lifting the $1.5bn limit on market capitalisation at the time of initial investment. This opens up the Chinese market to the trust, at a time when China has suffered a significant sell-off and therefore could be at an attractive entry point.

Good recent performance has seen the discount come in from a five-year average of 13.2% to 12%. Some of the changes adopted in January could help that close or at least remain narrower in future: the five-yearly conditional tender offer, the stock split which makes it easier to trade shares and the enhanced dividend, with the ability to pay out of capital to support it. If successful, these moves could boost shareholder returns offering another potential source of performance alongside stock-picking and structurally high gearing. The material reduction in the management fee (see Charges) only adds to the attractions of this trust which is one of few to focus on the huge growth potential in small cap Asian companies.

bull bear
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
Portfolio is expensive relative to the market, which means earnings growth will need to meet expectations
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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