Aberdeen Asia Focus (AAS), a £519m smaller companies investment trust, has marked its 30th anniversary with a small name change and a big rise in its annual return.
Out goes the silly Abrdn moniker following its fund manager’s welcome rebranding and in comes news of a 20.3% underlying investment return that smashed the 7.6% return from the MSCI AC Asia ex-Japan Small Cap index in the year to 31 July.
That’s a turnaround from the previous year when growth in net asset value (NAV) totalled 7.9% and trailed the benchmark’s 14.1% return.
A range of stocks picked by fund managers Gabriel Sacks and Ng Xin Yao contributed to the outperformance. Precision Tsugami China, which makes high-precision machine tools, did well on the back of earnings improvements and a solid order pipeline including early orders in robotics and artificial intelligence (AI), the company said.
Tech stocks Choma ATE and Taiwan Union Technology stood out with share prices soaring 90.8% and 56.5% during the 12 months. Indian telecoms company Bharti Hexacom and South Korea’s Korea Shipbuilding & Offshore Engineering and Hyundai Marine Solution also performed well.
A step-up in share buybacks saw AAS purchase 17.9m of its cheap shares, equivalent to 11.6% of the company, adding 1.6% or 5.5p to NAV per share.
This helped narrow the discount, or gap, between the share price and NAV from an average of 15.8% to 10.1%, lifting total shareholder returns to 26.6%.
That figure includes quarterly dividends which totalled 6.43p per share in the financial year, up marginally from the 6.42p the growth fund paid in the previous year. The payout looks secure at this level with 13.6p in revenue reserves providing more than a year’s cover.
With one year to go in the five-year performance review period launched after a strategic review in 2021, AAS is well placed to avoid a 25% tender offer next year.
Following earlier underperformance, it had pledged to buy back up to a quarter of its shares if its NAV performance fell behind the benchmark in the five years to 1 August 2026. So far it is well ahead with a total underlying return of 36.9% beating the 25.9% of the index.
Chair Krishna Shanmuganathan said: “This outperformance reflects your manager’s unwavering commitment to investing in quality and resilience with long-term growth prospects amongst Asia’s next generation of market leaders, and their expertise, based on an on-the-ground presence with 39 analysts and investment managers operating around the region, providing bottom-up research and local intelligence.”
Equity research at Aberdeen had been separated from portfolio management with analysts made more accountable for their recommendations and their work sharpened with the help of AI, he said.
Given the 30-year anniversary, the chair highlighted the trust’s “outstanding” performance since launch in 1995. AAS had delivered 2,995.6% growth in net asset value that dwarfed both the 593.6% return of the large company benchmark MSCI AC Asia Pacific ex-Japan and 343.5% from the blended small-cap index it also uses to measure its performance, he said.
Shanmuganathan plans to promote the company more, conscious that “many investors are still underestimating the benefits of allocating part of their capital to Asian smaller companies, which have proven to be less correlated to mainstream equities and have offered superior returns compared with Asian large caps.”
At 31 July AAS was 10.2% geared, broadly unchanged from a year before, although net borrowings have since dipped to 8.4%, with £35m drawn on a new credit facility with the Bank of Nova Scotia.
Our view
James Carthew, head of investment company research at QuotedData, said: “Neatly, Aberdeen Asia Focus results reveal that its NAV has risen 30-fold over its first 30 years, that’s an average of 12.2% every year. The sheer magnitude of the trust’s outperformance of its benchmark, which “only” managed a 4.5 times rise, demonstrates the power of active investing and, I think, the strengths of the investment trust structure, which is ideally suited to the trust’s small-cap focus.”
