Aberdeen Asian Income Fund (LON:) is celebrating its 20th anniversary with improved performance under new manager Isaac Thong, who joined Aberdeen’s Singapore-based Asia Pacific Equities team as a senior investment director in May 2025. He is making his mark in terms of increased portfolio activity as he and investment director Eric Chan have reduced the active geographic positions and increased stock-specific risk.
Recent results are encouraging and are building on the company’s longer-term record of outperformance. In early 2025, AAIF’s board announced an enhanced dividend policy and a three-year continuation vote, which should increase the company’s appeal to both existing and prospective shareholders.
Exhibit 1: Five-year NAV outperformance versus MSCI AC Asia Pacific ex Japan
Source: LSEG Data & Analytics, Edison Investment Research
Why Consider AAIF?
Since its launch in December 2005, AAIF has provided access to the current and future leading, reasonably priced, dividend-paying Asian companies. This strategy has continued under the new manager. The portfolio is diversified by geography, sector and market cap, and its prudent nature means that AAIF’s share price is unlikely to keep up with strong growth markets, but should perform relatively well during gradually rising markets with broad participation.
Asia is a region with above-average growth potential that remains attractively valued and has delivered solid total returns for shareholders, What may not be fully appreciated is its income prospects: since the beginning of the century, more than 50% of the returns have come from dividends. Thong reports that Asian company fundamentals are very strong, with high levels of free cash flow generation, which has led to an increased focus on paying dividends.
AAIF’s relative performance is showing steady improvement. The company has maintained a solid outperformance versus the MSCI Asia Pacific ex Japan Index over the last five years (Exhibit 1), and is now modestly ahead over the last decade in both NAV and share price terms.
The company’s enhanced dividend policy, which is based on quarter-end NAV rather than income, should widen AAIF’s appeal. Also, with a likely 17-year record of higher dividends, the company is just three years away from earning its place on the list of AIC dividend heroes.
NOT INTENDED FOR PERSONS IN THE EEA
AAIF: Diverse Asian Income with Good Capital Growth Prospects
Since becoming lead manager in May 2025, Thong and Chan have taken advantage of market volatility to reduce the portfolio’s active geographic positions and increase stock-specific risk, while retaining the focus on quality and income. The managers are part of Aberdeen’s Singapore-based Asian equity team, which benefits significantly from its proximity to AAIF’s investment universe in terms of building relationships and seeking out interesting investment opportunities. During its 20-year life, the company has weathered a succession of market and economic cycles and has benefited from its closed-end fund structure. Over time, the use of gearing has enhanced returns, and having long-term permanent capital has enabled investment in smaller-cap companies; currently, these sub-£5bn businesses make up around 15% of NAV.
Perspectives from AAIF’s New Manager
Thong explains that for income investors seeking diversification, AAIF fits the bill. It offers a very attractive dividend yield, and there are many more income opportunities available in Asia than in the UK. The manager invests in high-quality dividend franchises, which are robust businesses generating reliable free cash flow and have strong dividend policies. Interestingly, in general, there has been an increase in the dividend culture among Asian corporates. Thong notes that these companies are generating record levels of free cash flow, which, along with strong balance sheets, have supported much higher levels of organic earnings and dividends growth in recent years. The manager highlights that AAIF’s dominant feature is quality. He invests in companies with more stable and predictable earnings, which provide a reliable buffer during market turbulence. Thong is an active investor; he and Chan have taken advantage of stock price volatility to invest in quality companies at advantageous prices, while ensuring that AAIF is adequately diversified by geography and sector and the portfolio is not overexposed to a single market factor.
The manager says that while he is aware of the macroeconomic environment, the stock selection approach is based on bottom-up considerations. He comments that there may be longer-term risks from US tariffs affecting inflation and global trade, but so far, their effects have been manageable. Thong does acknowledge that political risk is higher in Asia than in developed markets but varies by country. He points to political risks in Indonesia, along with Thailand due to less stable leadership, but China and South Korea both have policy tailwinds. In China the authorities are implementing looser monetary and fiscal policies to support economic growth, while South Korea has the Corporate Value-up Program to address the ‘Korea discount’ and enhance shareholder value, which is supported across the political spectrum.
Thong remains positive on the prospects for Asian stocks next year. Stock market strength in 2025 has been mainly due to higher valuation multiples, and while the revaluation versus developed markets may have further to go, the manager believes that corporate earnings will be the next driver of Asian stock market performance. He highlights that there are some overlooked areas in the region such as in Southeast Asia, which is home to a variety of companies with compelling dividend yields.
Current Portfolio Positioning and Activity
Exhibit 2: Top 10 Holdings at 31 October 2025
Source: AAIF, Edison Investment Research. Note: N/A where not in end October 2024 top 10. Numbers subject to rounding.
At the end of October 2025, there were 55 holdings in AAIF’s portfolio, which was two lower than 57 at the end of October 2024. The top-10 concentration of 43.3% was higher than 40.4% 12 months earlier; four names were common to both periods.