Fund Profile

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Disclosure – Non-Independent Marketing Communication

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

Edinburgh Dragon (EFM) aims to generate long-term capital returns by investing in Asia Pacific ex-Japan equities, with a focus on quality growth characteristics and a secondary focus on starting valuations. The management team, headed by Adrian Lim, aims to select world-class Asian companies with strong balance sheets that are transforming their sector and setting governance standards.

The trust’s net asset value of £583m is the second largest in the AIC Asia Pacific peer group and makes it one of only two trusts over £500m. Aberdeen Standard’s 50 fund managers based in the region give it a broad research base and good access to companies.

The trust has performed very strongly over the past year following a series of refinements to the process and portfolio. NAV total returns of 12.9% compare to just 7.1% from the average trust in the Morningstar IT Asia Pacific ex-Japan sector and 3.8% from the MSCI AC Asia ex-Japan index. This is the second-best return in the 13-trust sector over the period, narrowly behind its stablemate Aberdeen New Dawn.

The refinements to the process have centred on making the team quicker to spot problems in portfolio companies, but the intention is to continue to be long-term in outlook and Morningstar data show a turnover consistent with a five-year holding period. The trust has increased its weighting to technology, however, and narrowed its underweight to China. It maintains strong overweights to India and Indonesia, and a focus on quality characteristics that served it well in the 2018 global sell-off.

Despite the improved recent performance, the portfolio continues to trade on a wider discount than the sector average: 10.8% compared to the 6.1% peer group average. A tender offer in January was oversubscribed and the board continues to be active in employing buybacks.

Dividends have grown steadily over the past five years, with compound growth of 16%. The dividends are fully covered and reserves are over three times the payout, although the focus is on total returns and so the yield is only 1%.

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Fund History

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25 Mar 2022 Slides and Audio: Asia Dragon
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23 Mar 2022 Fifteen ideas for your ISA
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08 Dec 2021 We are the (ESG) champions
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09 Sep 2021 Fund Analysis
DGN offers core exposure to high quality Asian companies and trades on a wide discount…
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…
31 Mar 2021 East End boys and West End girls
Our analysts debate whether the US or Asian stock markets will deliver the best returns over the next decade…
24 Feb 2021 Fund Analysis
DGN has returned to form with strong five-year performance despite extremely volatile markets…
08 Sep 2020 Fund Analysis
DGN’s focus on quality could prove attractive if the economic situation in Asia deteriorates…
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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...
13 Feb 2020 Fund Analysis
DGN has been performing strongly thanks to good stock-picking…
28 Aug 2019 Quality street: can the dominant style continue to outperform?
For several years, quality as an investing style has dominated, outperforming both value and growth. We examine why the case for quality remains strong and the importance of taking an active approach…
12 Aug 2019 Fund Analysis
This Asia focused trust remains on a far wider discount than its peers despite a marked improvement in performance...
10 Oct 2018 Information overload
Our analysis shows the long term case for emerging markets remains largely unaffected by much of the negative newsflow surrounding the sector...
01 Oct 2018 Fund Analysis
This Asia Pacific ex Japan trust has undergone a significant transformation in recent years, with exposure to technology and China reflecting a new tilt towards quality...
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