Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

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

Invesco Asia Trust (IAT) is managed by Ian Hargreaves, who aims to generate double-digit returns over a three- to five-year period by investing in good-quality businesses which are worth more than the market believes. Generally, returns are expected to come from capital growth, but a secular shift to paying higher dividends in the region means that the yield on IAT’s portfolio has risen to 2.8% (the shares currently yield 2.2%). Ian expects dividend growth to be a medium-term trend in the region, while IAT’s board is committed to growing the dividend, and has the ability to pay out of capital.

The trust has generated returns close to target since Ian took over in March 2011, with annualised NAV total returns of 9.4%, despite the market trending sideways over the past two years. IAT has tended to perform well in both rising and falling markets, helped by the strategy of balancing risk exposures (see the Portfolio section). Overall, the trust has outperformed its peer group by an impressive 16% over five years, with Ian beating the benchmark in both good times and bad. In fact, he has outperformed in seven calendar years out of the last nine.

Ian observes that the valuation gap between IAT’s portfolio and the index (MSCI AC Asia ex Japan) has widened in recent months as he has found a number of cheap opportunities after a weak period for Asian markets. These valuation opportunities and Ian’s optimism for the region in 2020 explain why the gearing has reached new highs, as we discuss in the Gearing section.

Despite the strong long-term performance record, the discount stands at 9%, wider than the AIC Asia Pacific sector average of 7.5%.

Analyst's View

IAT’s manager Ian Hargreaves employs a sophisticated strategy which we think should allow it to do well in different types of markets. The stock-selection strategy balances growth and valuation inputs while the risk-management work aims at ensuring the portfolio is not overexposed to any risk factors or style, and the benefits of this approach come through in the consistent record of returns. Here Ian benefits from the depth of resources at Invesco, which allows him to understand the risks in his portfolio while retaining full autonomy over investment decisions.

That said, there is a value tilt to the portfolio which we believe could be attractive after a period in which growth has outperformed considerably in Asia. This comes from the contrarian approach Ian takes to identifying undervalued Asian franchises. The value tilt is more pronounced than it has been in the past, thanks to the opportunities that have opened up in the weak markets of late 2018 and in 2019.

Ian is excited enough by these opportunities and the green shoots he sees in the economic data to have raised gearing to new highs. As such, we believe IAT is well positioned should 2020 see a rebound in markets. Although Ian is more bullish and more positioned in cyclicals than he has been in the recent past, having met with him and discussed his approach and outlook we are convinced he remains a cautious, risk-aware investor, and the portfolio will continue to reflect that.

We believe that if Ian is right that the data suggests an uptick in manufacturing, exports and cyclicals in 2020, this should drive shareholder returns in several ways. First of all, the portfolio’s valuation discount to the wider market should close. Secondly, should the region perform as well as Ian expects next year, we would expect discounts across the sector to move in. At the same time, given the trust trades on a significant discount to more ‘growthy’ peers (perhaps due to its value tilt), the discount relative to its peers’ should narrow. These possibilities should be considered against a backdrop where IAT’s discount of 9% is wider than the sector average of 7.5%.

bull bear
A highly experienced manager with an in-depth knowledge of the region The portfolio's cyclical exposure and gearing could hurt if the market falters
A wider discount than peers despite strong relative performance The US/China trade war means there is significant uncertainty about the prospects for Asian markets
A flexible approach which has led to a strong track record of outperformance in rising and falling markets The discount has proven stubborn and so could remain wide relative to peers'
Continue to Portfolio

Fund History

10 Jun 2022 Keeping your discipline
It’s tempting to try and predict the unpredictable. IAT shows the benefits of keeping to your investment principles...
09 Mar 2022 Fund Analysis
IAT could appeal to investors looking to diversify in a growth-heavy sector…
16 Feb 2022 Investing in Asia with investment trusts
How closed-ended funds can help investors get exposure to Asian companies…
03 Feb 2022 Video update: Invesco Asia
Update from new co-manager Fiona Yang...
06 Oct 2021 Slides and Audio: Invesco Asia
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
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...
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…
09 Aug 2021 Fund Analysis
IAT has enjoyed a strong period of outperformance, boosted by a diverse group of companies…
09 Mar 2021 Asian opportunities in challenging times
Ian Hargreaves, manager of Invesco Asia Trust plc, believes the strength of the Asian equity markets are on the up since their March 2020 lows...
21 Jan 2021 Fund Analysis
IAT has significantly outperformed in Ian Hargreaves’ first five years as sole manager…
24 Sep 2020 Fund Analysis
IAT’s new dividend policy will see it pay 4% of NAV as a dividend each year…
06 Aug 2020 Ian Hargreaves
Ian Hargreaves is co-head of the Asian & Emerging Markets Equity Team at Invesco in Henley on Thames and runs a number of pan-Asian portfolios including Invesco Asia Trust (IAT), Invesco Asian Equity Fund and the Invesco Global Emerging Markets Fund (UK)...
28 May 2020 Opportunities from the Covid-19 crisis
Ian Hargreaves of Invesco outlines key questions to be considered through this 'black swan' event...
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
22 Jan 2020 Fund Analysis
IAT’s cheap portfolio is positioned for a strong 2020 in Asian markets…
06 Nov 2019 Poacher turned gamekeeper
Former fund manager - now investment trust chairman - Neil Rogan discusses how his own lessons from the job have helped him in his role...
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...
03 Jul 2019 Push-me pull-you
Two contrasting influences are dominating the outlook for Asian markets - we analyse them and how Asia trusts are positioning their portfolios in response...
02 Jul 2019 Fund Analysis
Invesco Asia offers a diversified portfolio that has outperformed in a variety of market conditions...
10 Jul 2018 Outlook for Asia: still positive?
Invesco's Ian Hargreaves gives his take on the trade war and more...
19 Apr 2018 Fund Analysis
This concentrated portfolio of Asian equities has a strong track record, yet it continues to trade at a significant discount...
19 Apr 2018 What now for Asia?
We examine battered Asian equities amid talk of a trade war between the US and China...
30 Nov 2017 Race ready?
We analyse the outlook for emerging markets and, in particular, the genuine active funds that focus on them…
29 Nov 2017 Fund Analysis
An unconstrained strategy focused on Asian equities with a bias towards smaller companies...
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...
View all

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