Gold-Rated Asian Income Trust

THE INCOME INVESTOR: Looking to diversify your income portfolio away from UK equities? This Gold-rated investment trust pays a 4% yield from Asian companies

Morningstar Analysts 7 May, 2015 | 2:35PM
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The Aberdeen Asian Income (AAIF) trust emphasises quality, growing companies that have the right management to deal effectively with that growth. The team is naturally cautious and they insist on meeting companies prior to making any investment in them. They make full use of the team’s locations across the region in doing so and they also believe in rotating company visits to ensure they all stay objective.

It’s a tried-and-tested process that has delivered on both the capital and income objective. This fund regularly outperforms its Morningstar Asia-Pacific ex-Japan Equity Category average fund. Much of this stems from the team’s ability to protect capital in down markets, in particular in 2008, when the fund lost nearly 9% by year-end, compared with the average category fund’s loss of more than 33%. Conversely, in up markets like 2009, the fund has risen but to a lesser extent than peers.

Japanese figurine outside Asian restaurant in Tokyo

The profile results mainly from Aberdeen’s penchant for quality, but here it has been helped further by a more prominent focus on yield than in other Aberdeen funds. Although there is no explicit yield target, the board’s objective is to grow the dividend income each year.

Thus the team is very conscious of the level of income from companies and their potential contribution to the revenue reserve account.

Indeed, the team is another reason for our high conviction. The fund is run by a seasoned and stable management team, of whom we have a high opinion.

This team is led by Hugh Young, who cofounded Aberdeen’s Singapore office in 1992 with former colleague Peter Hames. Hames retired from the firm in 2010 but this hasn’t had a negative impact. Indeed, many team members have spent more than 10 years at the firm, which brings stability and depth of understanding to its process.

All said, we think it’s a strong proposition for investors looking for Asian equity, with prospects for growth of both capital and income. We are conscious of the recent underperformance, but the process has been tried and tested in such a way before and our conviction in both the team and that process is unchanged. The fund retains our Gold rating.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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