Good performance for Aberdeen Emerging Markets but board frustrated by discount – Aberdeen Emerging Markets (AEMC) has announced its half year report for the six months to 30 April. During this time its share price return was 20% while its NAV return was 21.5%. This compares to a 15.2% return for its MSCI Emerging Markets benchmark. The discount at which AEMC’s shares trade relative to the NAV widened slightly during the period, ending at 14.6% compared to 13.4% at the start.
The trust paid a first interim dividend of 5.75p per share in March, and a second and third interim dividend for the same amount will be paid tomorrow and in September respectively. The board anticipates declaring one further interim dividend in respect of the current financial year, of at least 5.75p per share. The total dividend for the year is therefore expected to be no less than 23p per share, representing a yield of 3% based on the share price of 723p as at 18 June 2021.
Emerging markets performed strongly over this time, beginning with the positive economic implications of the approval of the first Covid-19 vaccines in November, and resulting in strong performance in particular from those sectors that had been impacted most during the preceding months. During the latter part of the period under review, markets gave up some of their gains as concerns grew about the outlook for inflation.
Chairman, Mark Hadsley-Chaplin, said: “This past interim period spans good performance in emerging markets generally, and commendable relative performance by the investment management team led very ably by Andy Lister and Bernard Moody. Yet it also very much highlights some frustrations which I am sure will be recognised by most shareholders. Despite the favourable winds of investment performance, the share price has continued to trade at a discount to asset value which we regard as too wide whilst, equally, our share register has remained highly concentrated with little sign of the desired momentum of new investor interest.
“We see two related factors at work making addressing these issues less straightforward. Firstly, as regards the discount, a board would normally deploy its power of ‘buying back’ shares in the market in order to narrow that discount. Indeed, discount management is a stated objective of your Board and helps to demonstrate confidence in the long term future of the mandate. Your Board has deployed this power in the past, but it will not have escaped your attention that at 16% we are presently well below the Financial Conduct Authority’s free float requirement of 25%.
“The FCA has recognised that, particularly under ongoing Covid restrictions, our ability to improve the level of free float is somewhat limited but the effect remains that the Board’s hands are tied when it comes to undertaking a determined buy back campaign. The second factor, insufficient interest from new investors to help reduce our share register concentration, appears to have been adversely impacted by the current aversion to fund of fund structures, particularly amongst wealth managers, despite our performance. We had been waiting for a decisive period of strong absolute and relative performance in the belief that this could result in a significant narrowing of the discount and a flow of new investor interest, alleviating the free float issue.
“Clearly, we have seen such performance but this has not led to a significant narrowing in the discount. We are, therefore, actively considering changes we can make that would address both the free float issue and the discount and we shall make any appropriate announcements in due course.”
AEMC : Good performance for Aberdeen Emerging Markets but board frustrated by discount