Fund Profile

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Disclosure – Non-Independent Marketing Communication

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

Aberdeen Standard Asia Focus (AAS) invests in smaller companies in the Asia Pacific region, with a focus on finding market leaders with sustainable earnings growth and strong, resilient balance sheets.

AAS is managed by Hugh Young, one of the most experienced fund managers in the industry. In 2018 he took more personal control over the portfolio and initiated an overhaul at the board’s request. This move led to three changes: an increased concentration, a more ruthless attitude to underperforming companies, and a greater balance between old economy sectors and new economy sectors such as information technology.

The new approach led to outperformance in 2018 and 2019, and although returns in 2020 have been behind the index, the weighting to technology and ecommerce has boosted returns. In addition, the quality element to the approach has been evident in the operational resilience of the portfolio in an extreme crisis.

The portfolio has structural gearing, which has been a hindrance in a sharp market correction – as we discuss in the Gearing section. But structural gearing is intended to boost returns over the course of a cycle and avoid the manager having to time taking on borrowings.

The discount is 14.5%, slightly wider than AAS’ five year average of 13.5%. Small caps have largely been out of favour over that period as the market has focused on large caps, China and technology.

Dividend growth has been strong in recent years, as we discuss in the Dividend section, and the trust has around 2.5 years’ revenue reserves on the balance sheet. The historic yield is 2%.

Analyst's View

In our view AAS’s focus on strong balance sheets and sustainable earnings is attractive in a troubled economic environment. The portfolio is now also more balanced in stylistic exposures following the 2018 revamp, with greater exposure to high growth technology companies. These have a tailwind behind them in the form of the coronavirus pandemic, and the increase in people working and shopping from home as a consequence of the virus. However we think having a counterweight in less highly valued companies less geared to increasing growth rates is now preferable; based on such a sustained period of performance, and the higher valuations typical in that segment of the market.

This is a strange crisis in that it has thrown individual countries back on their own medical, institutional and economic resources, which has resulted in some unlucky hits to AAS – given its highly active country positioning. However we would expect a lot of this to revert as the pandemic recedes, hopefully leaving the operational resilience of the portfolio as a more important driving factor.

On a wide discount and after a period of limited investor interest in small caps, AAS and Asian small caps in general would be easy to overlook. But we would note that trends can revert quickly, and the best returns are often made by being positioned early, with the shares trading significantly below par.

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 can lead to large under or overperformance at times
Extensive experience and resources in the Asian Equities Team Asia large cap is in a sustained period of outperformance over small cap
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 our list of discount opportunities...
13 Feb 2019 Sweet treats
Eight trusts with the potential for strong returns, currently sitting on unusual 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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