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Fund Profile


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.

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Asia Dragon (DGN), formerly known as Edinburgh Dragon, has generated strong absolute and relative performance over the past five years from a quality growth approach to investing in Asia ex-Japan equities.

The period has seen a return to form for the trust after a difficult 2013-2015 period. A more balanced portfolio, wider exposure to different branches of technology and more ruthlessness in selling out of positions have seen NAV returns well in excess of the benchmark, as we discuss in the performance section. Exposure to countries hard hit by the pandemic in Q1 2020 hurt relative performance but DGN has outperformed in the rebound.

DGN has a portfolio well-balanced across different sectors of the economy. This includes ‘new economy’ sectors such as e-commerce, software and hardware as well as ‘old economy’ sectors such as banks and real estate. Typically, the portfolio trades on a premium valuation versus the index, with higher expected growth and lower net debt (see portfolio section).

The trust is managed by Adrian Lim and Pruksa Iamthongthong of the Aberdeen Standard Asian Equities Team. They take a long-term perspective on their investments, and consequently have long embedded ESG concerns within their stock selection process. In particular, they look for companies with trustworthy management teams with a track record of good capital allocation and respect for minority shareholders (see ESG section).

Despite its strong recent performance, DGN remains on a discount of 9%. This compares to the five-year average of 12% but is wide when compared to the sector average of just 4.3%.

Analyst's View

We think DGN is a strong core option for investing in the Asia ex-Japan region. Although the managers are resolutely active and bottom-up in their approach, they have built a portfolio with exposure to strong companies across a range of industries and sectors. We think that is attractive at a time of macroeconomic uncertainty due to the pandemic, and after a period of extreme outperformance for a narrow group of companies in the North Asian technology sector and e-commerce. Furthermore, the team have clearly integrated the new processes resulting from their 2017 review well without jettisoning the crucial building blocks.

Another factor supporting DGN as a core holding is the long-term investment horizon of the managers and the consequent high emphasis given to ESG issues. The team had integrated ESG long before it became fashionable to so do, and believe good corporate governance is integral to being a high-quality company. Their focus on shareholder engagement and encouraging companies to improve their behaviour and attitudes is likely to appeal to shareholders who value ESG highly.

DGN’s wide discount is perhaps partly explained by peers that are much more strongly focused on technology and e-commerce - which are in greater favour after an exceptional 2020. Although we cannot predict the future, we note that it can be dangerous to chase past performance and a narrow set of companies at the expense of diversification.

bull bear
The revamped strategy has led to a period of significant outperformance Higher exposure to technology has brought with it higher beta than the trust had in the past
Deep resources and highly experienced management
Structural gearing, although modest, can increase downside risks (while helping on the upside)
The quality approach should ordinarily lead to outperformance in troubled markets
Large positions in three stocks could mean increased volatility
Continue to Portfolio

Fund History

20 Nov 2023 Fund Analysis
DGN’s combination offers numerous advantages, as well as being on a substantial discount…
25 Oct 2023 We’re going to need a bigger boat...
We argue corporate activity is picking up, making the investment trust sector an exciting place to invest…
26 Jul 2023 Our board and saviour
Boards are proving their value as discounts languish…
30 Jun 2023 High end China
Several managers are investing in higher-end consumer growth in the world’s second-largest economy…
15 Feb 2023 Fund Analysis
DGN hopes to capitalise on a recovery in sentiment towards Asia...
25 Jan 2023 The toad to recovery
Two of our analysts debate the outlook for China in 2023…
06 Apr 2022 Fund Analysis
DGN offers core exposure to a fast-growing region…
25 Mar 2022 Slides and Audio: Asia Dragon
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 16 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
08 Dec 2021 We are the (ESG) champions
Investment trusts tend to be amongst the best-performing ESG strategies in the combined open- and closed-ended universe…
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…
26 Aug 2020 Trump v. Biden
Two of our analysts debate who will win the US election and what that means for markets…
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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