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Fund Profile

Aberdeen Smaller Companies Income 06 April 2020


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by abrdn Smaller Companies Income. 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 Smaller Companies Income Trust (ASCI) offers investors a chance to access the growth potential of UK smaller companies, whilst enjoying a diversified source of income.

After Aberdeen Asset Management and Standard Life merged, the trust was overhauled by the former Standard Life UK smaller companies team in 2018. Abby Glennie took over the portfolio, incorporating the proprietary screening system (known as the Matrix) developed within Standard Life Investments prior to the merger.

As Abby only took over the portfolio in September 2018, we think it is still early to fairly judge performance. However, signs so far are promising, and the process is based on the approach tried and tested over the long term by Standard Life Smaller Companies Trust (SLS). SLS is run by the renowned manager Harry Nimmo, who also supports Abby with ASCI's portfolio. Alongside capital growth, a key focus for the ASCI team is generating an income for investors, and the yield is currently 3.9%. The most recent full-year dividend was increased by 12.2% from the prior year, and was fully covered by reserves.

The discount narrowed over 2019, likely due to the strong performance relative to peers and continued attractive levels of income. However, the coronavirus pandemic has seen the discount slip to 25.2%.

Analyst's View

The new team has brought a breath of fresh air to the trust (which was previously part of the Aberdeen stable) since taking over in 2018. We think the distinctive approach, using proprietary screens, allows Abby to be objective and have fewer external biases or influences impacting her investment decisions. The move to focussing on higher-quality companies could also benefit investors during the difficult environment caused by the coronavirus. Although to long-term investors of ASCI this is a totally new approach, it has been tried and tested on Harry Nimmo’s Standard Life Smaller Companies Trust (SLS).

Although similar in process, ASCI is different to SLS and the broader UK smaller companies sector in several ways. Firstly, with net assets of £60m the trust is considerably smaller than SLS (£467m) and the sector average (£257m), which allows the manager to be very nimble. Another key difference is ASCI’s focus on income. Currently the trust yields 3.9% on a historical basis, in comparison to a dividend yield of 2.6% for SLS and 3.8% for the broader sector.

2019 saw the discount narrow considerably as performance improved, although this has since reversed with concerns surrounding coronavirus and the associated economic slowdown. We think once the dust has settled, if the improvement in performance continues it should over the long term lead to a discount narrower than peers’. Despite the economic picture being exceptionally cloudy, the discount to NAV potentially offers an attractive entry point.

bull bear
Utilises the same approach as SLS, an approach which has an excellent track record for capital appreciation At c. £65m in net assets, the trust will be too small for some wealth managers
Strong dividend growth and an attractive yield relative to peers The OCF is above average, a result of the small size of the trust
A diversified income stream relative to other equity-income vehicles The 7% gearing increases risks
Continue to Portfolio

Fund History

26 Jul 2023 Our board and saviour
Boards are proving their value as discounts languish…
18 Jan 2023 Fortune favours the brave
Our research suggests a recession has already been priced into small cap trusts, but risks abound...
02 Dec 2022 Fund Analysis
ASCI offers a differentiated way to invest in UK smaller companies…
21 Mar 2022 Fund Analysis
ASCI offers a growing dividend from a source that could diversify income portfolios…
16 Feb 2022 Perfectly formed
Our research suggests that investment trusts really are a better way to gain exposure to smaller companies…
15 Sep 2021 Bargains galore
We review our discounted opportunities portfolio, with one constituent rallying more than 30% in just two months…
11 Aug 2021 In at the deep end
Does seeking out wider-than-usual discounts help investors systematically outperform in the UK trust space?
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…
23 Jun 2021 Fund Analysis
ASCI has outperformed over the current managers’ tenure…
02 Jun 2021 Fortune favours the brave (sometimes)
Our research suggests wide discounts often herald high NAV returns too…
14 Apr 2021 Wide Boys
We review our portfolio of chonky discounts as one star performer hits its target…
22 Mar 2021 Results analysis: Aberdeen Smaller Companies Income
Reporting results for the year ending 31 Dec 2020, ASCI remains a solid trust on a significant discount to peers…
09 Dec 2020 Fund Analysis
Aberdeen Smaller Companies Income (ASCI) has generated outperformance since the change of strategy and currently offers a 2.8% yield…
06 Apr 2020 Fund Analysis
ASCI offers investors both capital appreciation and income from a portfolio of high-quality UK smaller companies…
25 Sep 2019 Fund Analysis
Offering income seekers a chance to diversify their source of dividends, ASCI has a portfolio of smaller companies with strong growth potential…
01 Aug 2019 Rethinking UK equity income
Despite being a popular allocation for investors, the UK Equity Income sector is currently plagued by the problem of concentration. Our analysis suggests smaller companies could be a strong alternative source of diversified income…
26 Jun 2019 Measure for measure
In the first of a two-part series, we examine the tools investors can use to assess how active a manager actually is…
01 May 2019 Sweet or sour?
Three months in, we check up on our list of discount opportunities...
13 Feb 2019 Sweet treats
Eight trusts with the potential for strong returns, currently sitting on unusual discounts...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
01 Feb 2019 Fund Analysis
Under the watchful eye of a new manager, Aberdeen Smaller Companies Income targets income and capital growth from UK smaller caps...
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