Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

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

Invesco Asia (IAT) invests in Asian companies in order to generate capital growth. The strategy is valuation sensitive and contrarian, but the process ensures a diversified portfolio which has managed to outperform in different types of market in recent years.

Over five years the trust has handsomely outperformed the index and its peers. NAV total returns have been 75.7% compared to 64.1% for the index and 64.4% for the Morningstar IT Asia Pacific ex Japan peer group and the share price returns have been even better: 80.1%. The trust has outperformed in two of the past three down markets as well as during the 2016 and 2017 sharp cyclical rally.

Stock selection has been key to the alpha generated, with positions in India and China particularly significant. Some positions have been held for many years and generated excess returns for shareholders: Samsung Electronics in Korea, Netease in China and UPL in India, for example.

Historically, the portfolio has tended to trade on a significant discount to NAV and peers, and the board struggled to shift it within their 10% maximum. However, it appears that the strong performance has finally led to a significant shift, with the discount below 10% for most of 2019, although still wider than the average of the peer group which it has outperformed. It is currently on a 9.7% discount.

A tender offer in 2018 saw some discount playing investors reduce their holdings, and the board has focused on broadening the shareholder base which we believe has helped the performance to affect the discount unlike in the past.

A revamped dividend policy may also have been significant: this year the board, under a new chairman, has committed to a progressive dividend policy, and has signalled the intention to use revenue and capital reserves to fulfil this if required. The trust has also implemented an interim dividend for the first time, although the yield of 2% is still relatively low. However, should the trust pay the same final dividend on top of the interim already paid, the yield would jump to 2.9% on the current price. We note that trusts with a higher yield in the Asia Pacific sectors tend to trade on tighter discounts.

Kepler View

We like the balanced strategy of this trust, which allows the manager to take advantage of valuation opportunities and companies which are out of favour without being over-exposed to the “value” style of investing which has been under the cosh for many years. The long-term approach to stock-picking also increases the chance of generating alpha, in our view.

Currently it is hard to read the outlook for emerging Asia. So much depends on political decisions surrounding trade issues, whether that be broad policy issues or company specific concerns such as those regarding Huawei. We think focusing on stock selection is a superior approach in such an environment, as it is easier to add value by company analysis than by forecasting political decisions. IAT takes this approach, and the conservative net cash positioning of the manager, Ian Hargreaves, also fits well with a cautious approach to the current macro-economic and political climate in the region.

The progressive dividend policy could well see the discount come in too, in our view. The yield is only 2% at present, but if there was to be a little growth in the final dividend this year it could easily be above 3% (depending on share price movements), and we have seen trusts with a persistent discount have some success in narrowing or eliminating it through offering a decent yield.

Bull Bear
A strong track record of outperformance in rising and falling markets A reluctance to gear could lead to the trust lagging sharp rallies
A highly experienced manager with in-depth knowledge of the region The yield is low, although the board is placing greater focus on growing dividends and has the tools to do so
A discount wider than peers despite strong relative performance Due to stock selection, the portfolio is quite cyclically exposed although the manager’s macro views are cautious
Continue to Portfolio

Fund History

09 Mar 2022 Fund Analysis
IAT could appeal to investors looking to diversify in a growth-heavy sector…
03 Feb 2022 Video update: Invesco Asia
Update from new co-manager Fiona Yang...
06 Oct 2021 Slides and Audio: Invesco Asia
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
23 Sep 2021 Now that's what I call a discount 2021!
For the second year running we examine trusts on discounts which, in our view, don't make sense...
25 Aug 2021 Is the UK’s debt a ticking time bomb?
Our analyst argues Rishi is right to worry about government debt and borrowing…
09 Aug 2021 Fund Analysis
IAT has enjoyed a strong period of outperformance, boosted by a diverse group of companies…
09 Mar 2021 Asian opportunities in challenging times
Ian Hargreaves, manager of Invesco Asia Trust plc, believes the strength of the Asian equity markets are on the up since their March 2020 lows...
21 Jan 2021 Fund Analysis
IAT has significantly outperformed in Ian Hargreaves’ first five years as sole manager…
24 Sep 2020 Fund Analysis
IAT’s new dividend policy will see it pay 4% of NAV as a dividend each year…
06 Aug 2020 Ian Hargreaves
Ian Hargreaves is co-head of the Asian & Emerging Markets Equity Team at Invesco in Henley on Thames and runs a number of pan-Asian portfolios including Invesco Asia Trust (IAT), Invesco Asian Equity Fund and the Invesco Global Emerging Markets Fund (UK)...
28 May 2020 Opportunities from the Covid-19 crisis
Ian Hargreaves of Invesco outlines key questions to be considered through this 'black swan' event...
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
24 Mar 2020 First in, first out?
We ask whether the brave should be raising their allocation to Asia...
22 Jan 2020 Fund Analysis
IAT’s cheap portfolio is positioned for a strong 2020 in Asian markets…
06 Nov 2019 Poacher turned gamekeeper
Former fund manager - now investment trust chairman - Neil Rogan discusses how his own lessons from the job have helped him in his role...
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...
03 Jul 2019 Push-me pull-you
Two contrasting influences are dominating the outlook for Asian markets - we analyse them and how Asia trusts are positioning their portfolios in response...
02 Jul 2019 Fund Analysis
Invesco Asia offers a diversified portfolio that has outperformed in a variety of market conditions...
17 Aug 2018 Why Asia's crosswinds will not blow it off course
Ian Hargreaves explains why heightened trade tensions and fading earnings momentum will not stop Asia's equities shining...
03 Jul 2018 Outlook for Asia: still positive?
Invesco's Ian Hargreaves gives his take on the trade war and more...
19 Apr 2018 When others are fearful...
We ask whether it is time to be greedy after the recent selloff in Asia equities...
19 Apr 2018 Fund Analysis
A broad ranging remit, which diversifies well the traditional exposures and biases of the typical fund....
30 Nov 2017 Race ready
Our analysis suggests conditions are right for emerging markets fund managers who can add real alpha to generate strong returns...
29 Nov 2017 Fund Analysis
A top-performing trust that invests across Asia and across the market cap spectrum via a value-orientated strategy
26 Jul 2017 Apt student
Invesco CIO Nick Mustoe tell us he started out with just a university grant as seed capital for his first portfolio...
24 May 2017 Fund Analysis
View all

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