Aberdeen New India (ANII)

Managers James Thom and Rita Tahilramani have a strong focus on quality when selecting equities for abrdn New India (ANII). The concentrated portfolio is populated from the bottom-up, with the managers looking for firms with high levels of recurring cash generation, sound balance sheets and good management teams. They have the flexibility to invest across the market-cap spectrum, although have found the majority of the best opportunities in larger companies, which make up around two thirds of the Portfolio.

The managers’ focus on quality has contributed to good NAV resilience despite the volatility of the past year. Share price returns have been particularly strong though, leading to a significant narrowing of the Discount year to date. Despite this, ANII remains at a wider rating versus the average of its India peer group.

India’s recent market pullback has provided James and Rita with several opportunities. They argue the recent volatility has led to a resetting of earnings expectations and valuations, which they have sought to capitalise on by rotating from their better performers, like real estate firms, into sectors such as the consumer discretionary sector where valuations have reset to more realistic levels. This has included rotation within certain sectors, as well as adding in areas where they believe they can capture a potential recovery, such as the diversified financial holdings sector, now that the Indian Government has reversed the policy steps that contributed to the pullback (see Performance).

So far, portfolio rotation has provided sufficient capital to fund new ideas. However, the board has renegotiated ANII’s Gearing facilities at a lower interest rate. At present, ANII is the only trust in the peer group using gearing, and the managers have headroom now to increase exposure should they identify more high-quality opportunities at good valuations.