Fund Profile

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Disclosure – Independent Investment Research

This is independent research issued by Kepler Partners LLP. Aberdeen Standard Investments is a client of Kepler Partners LLP. 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
AAIF’s focus on quality and value could be coming back into favour…
Overview

Aberdeen Asian Income Fund (AAIF) invests in emerging Asia and Australasia. The objective is to generate a high, and growing income and the strategy is to focus on high quality, cash generative businesses which pay dividends.

AAIF yields 4% on a historic basis. The board has been able to use revenue reserves to support the dividend through the pandemic and actually raised the FY 2020 dividend despite a fall in dividends received from the trust’s portfolio. As we discuss in the Dividend section, the portfolio revenues seem to have seen a good recovery in FY 2021 so far.

Unlike some of its peers, AAIF pays a dividend from natural income rather than from capital (although the board has that power in reserve). This means that all its holdings are expected to contribute to the yield and dividend growth requirements. As a result, AAIF has had little in the e-commerce space and more in traditional value sectors such as financials and materials. This has led the performance to be disappointing relative to peers in recent years, but to have been very good over the past year as the environment has changed (see Performance section).

While the discount narrowed at the start of 2021 during the reflationary rally, as Asian markets have sold off this year, it has widened again and stands at 12.7% at the time of writing.

Analyst's View

AAIF offers income-seekers a way to diversify their sources of income. As well as the exposure to the fast-growing Asian economies, the portfolio also offers significant exposure to technological hardware, which doesn’t feature heavily in UK equity income funds. The strategy of focusing on natural income has worked against the trust on a total return basis in recent years, but the current environment has been much more helpful. If the troubles in China continue, this will also help AAIF in relative terms, given its low weight to the country’s markets.

Despite an improvement in relative returns, the discount remains wide and has crept out to 12.7% at the time of writing. This has been a period of risk aversion in Asian markets, with ongoing concerns about the political and economic situation in China and perhaps also the effects of a global delta wave dip. It is worth noting that despite its being underweight to China, AAIF would be unlikely to escape the impact of a serious slowdown in the country, with the materials sector one vector of possible contagion. Nonetheless, given the ongoing issues in the country, AAIF’s low weighting could continue to be helpful. On the other hand, there is a cyclical bias via the high weight to financials and materials, which could cause problems if the economic recovery stalls.

bull bear
A good track record versus the High Dividend Index
Highly active country and sector positions could lead to periods of underperformance
Offers exposure to high-yielding technology stocks
Weight to financials and materials brings exposure to economic cycle
Disciplined team-based approach should aid consistency
Tends to run with gearing which increases sensitivity in down markets as well as up markets
Continue to Portfolio
2022 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for growth... Find out more

Fund History

16 Feb 2022 Investing in Asia with investment trusts
How closed-ended funds can help investors get exposure to Asian companies…
05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
06 Oct 2021 Slides and Audio: Aberdeen Asian Income
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
29 Sep 2021 Fund Analysis
AAIF’s focus on quality and value could be coming back into favour…
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...
15 Sep 2021 Bargains galore
We review our discounted opportunities portfolio, with one constituent rallying more than 30% in just two months…
05 Jun 2020 Deep impact
Audio and presentations from our conference this week, where fifteen of the world's best fund managers described a profoundly altered investment landscape...
13 May 2020 Braving the new world
Join 15 of the UK's best known fund managers at the Kepler Trust Intelligence Virtual Summit to find out how they see the world after the pandemic...
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...
19 Apr 2018 What now for Asia?
We examine battered Asian equities amid talk of a trade war between the US and China...
05 Apr 2018 The search for discounted yield
We scour the investment trust universe for trusts offering chunky yields on a discount...
29 Mar 2018 Fund Analysis
Aberdeen Asian Income Fund (AAIF) is an income producing trust that offers a yield of 4.3% via a portfolio of high quality, cash generative Asian companies...
30 Nov 2017 Race ready?
We analyse the outlook for emerging markets and, in particular, the genuine active funds that focus on them…
16 Jun 2017 Analysis: Asian income versus UK income
Given the numerous risks facing the UK, we analyse whether Asian income trusts can rival their popular peers in the AIC UK Equity Income sector...
02 Jun 2017 Finely balanced...
We take a closer look at the Asia Pacific ex Japan sector following a period of improved inflows into the open-ended sector and the recent outperformance of Asian equities...
31 Mar 2017 Bargain or basket case?
As the reality of Donald Trump's administration settles in, we examine the case for emerging markets exposure...
30 Sep 2016 Emerging markets: Is this rally the real deal?
We examine the recent rally in emerging markets and the impact this has had on discounts...
16 Mar 2016 Discounts in focus: Asia Pacific ex Japan
After our previous look at the Equity Income sector, we focus our attention on the Asia Pacific region where we identify four trusts trading at wide discounts to their historic norms.
01 Feb 2016 Why the China slowdown is good news
Turmoil in the market surrounding China’s slowing economy is creating buying opportunities in the region, according to new research from the Association of Investment Companies.
01 Feb 2016 Fund Analysis
A relatively focused portfolio investing in well established companies in Asia, led by the high profile Asian equities team at Aberdeen under Hugh Young.
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