Investment trust Aberdeen Asia Focus is a bit different to most other funds that trawl Far Eastern stock markets in search of winning companies.
Its emphasis is on finding successful investments outside of the big Asian tech firms which attract most attention from investors. And it’s an approach that manager Gabriel Sacks believes makes the £530 million stock market-listed fund an ideal portfolio diversifier.
‘Our emphasis on smaller companies means we can help investors obtain a deeper and broader exposure to Asia,’ he says. ‘It’s something different. Yes, it’s an easy part of the Asian market to ignore, and most people do. But it can be rewarding, especially as Asia is where the world’s stellar growth emanates from.’
The fund’s performance numbers back Sacks’ argument. Over the past five years it has delivered an attractive return of 82.5 per cent – and 30.2 per cent over the past year. In the process, it has outperformed the two other trusts – Fidelity Asian Values and Scottish Oriental Smaller Companies – which fish in the same pond.
Aberdeen Asia Focus is run by Sacks from London, assisted by colleague Xin-Yao Ng, who is based in Singapore. The pair also draw upon the expertise of a 40-strong Aberdeen investment team based across Asia.
The fund, comprising 60 stocks with an average market capitalisation of £3.5 billion, has no investments in Japan or Australasia. Its biggest country position is in India.
Its assets are spread across 13 stock markets, 12 of which are Asian. The exception is its holding in UK-listed MP Evans Group which owns plantation crops in Indonesia.
‘We’re relatively underweight in markets such as India, South Korea and Taiwan – and overweight in both China and Vietnam,’ says Sacks.
‘But market diversification for us is key, as is our focus on identifying quality companies.
‘There are specific risks in the markets we look at which demand caution – for example, regulatory risk in China. Yet, all the time, we are wanting to buy companies at a reasonable price which will then go on and grow.’
Among its success stories is Taiwanese tech company Chroma ATE, its sixth-biggest holding. Chroma manufactures testing equipment for the power industry across Asia, but it has now broadened out into providing semiconductor stress-testing solutions for US tech giants such as Nvidia.
Its shares are up nearly 200 per cent over the past year.
‘Its earnings have gained momentum,’ says Sacks, ‘with a resulting re-rating of the shares. We’ve taken some profits along the way.’ Another success is Vietnamese retailer Mobile World Investment, which the fund bought a stake in last year. ‘We like the management,’ says Sacks. ‘And it’s scaling up both its grocery business, Bach Hoa Xanh, and pharmacy chain An Khang.’ The shares are up 45 per cent over the past year.
The trust pays a quarterly dividend, equivalent to an annual income of around 1.7 per cent. In the last financial year, Asia Focus paid dividends totalling 6.43p a share. The first quarterly dividend for this year (to the end of July) was 1.6p, the same as last year.
The fund’s annual charges are 0.91 per cent and will fall if the assets keep growing.
The market ticker for the shares is AAS, and the market identification is BMF19B5.
Bargain hunters may like the fact that the trust’s shares, priced at around £3.80, are trading at a 10.5 per cent discount to the value of the underlying assets.
Sacks joined Aberdeen 17 years ago and also runs emerging markets portfolios for the company.
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