An overhaul of the £486m ($625m, €556m) Aberdeen Asian Smaller Companies Investment Trust has seen Hugh Young promoted to named manager and the investment strategy become more concentrated, although investors have stated a 0.04% reduction in fees is “disappointing”.
The trust will now be known as Aberdeen Standard Asia Focus, a press release published on Monday announced. The number of holdings will also be reduced from 80 to 60, with 30 core holdings.
The changes were announced alongside the trust’s annual results to 31 July 2018, where it reported it had outperformed the MSCI Asia Pacific ex Japan Small Cap benchmark by 6.9% in the second half.
Promotion lacks succession planning
The promotion of Young has been linked to the Standard Life Aberdeen merger.
Ryan Hughes, head of active portfolios at AJ Bell, said Standard Life has always preferred to have a named individual on funds although he thought the change would make little difference in day-to-day operations of the trust because Young was already an integral, longstanding part of the team. “I see little difference to the types of stocks that will be invested in.”
Instead, Hughes thought Young’s name would be used for marketing.
However, Adrian Lowcock, head of personal investing at Willis Owen, said while Young has a strong reputation for investing in Asia, his name on the fund highlights some reservations he has around the lack of succession planning in the team.
“The longer-term concern is the lack of other managers within the Aberdeen Standard Life stable as he is no longer a young manager.”
The trust also announced board changes with the appointment of Charlotte Black and Deborah Guthrie as directors.
Fee change disappointments
Aberdeen also said the management fee of the trust has been reduced to 0.96% from 1% and that this will now be based on market capitalisation rather than net asset value (NAV). The changes became effective on 1 November.
The fee is still “a little on the high side” and there are cheaper funds in the sector, said Hughes. “I would have preferred to see a greater reduction than the four basis points announced, albeit, this is offset by the move to a market cap calculation rather than an NAV basis with the market cap currently 15% lower than the NAV,” he said.
Likewise, Darius McDermott, managing director at Chelsea Financial Services, said the fee was “a little disappointing”, stating while the minor reduction was welcome, the raft of changes at the trust was an opportunity for Aberdeen Standard Investments to cut the fee a bit more.
However, Lowcock said Asian funds tend to be a bit more expensive than other areas such as UK funds and 0.96% is in-line with the sector.
Company results
The investment trust’s full-year results increased its final dividend by 8.3% to 13p and maintained a special dividend of 4p.
Since inception NAV has grown by 1619% in absolute terms, delivering an 1502% return to those who have held shares since 1995.
This compares with an increase during the same period of 378% in the MSCI Asia Pacific ex Japan Small Cap Index.
Young said: “Small companies in Asia, with their greater exposure to domestic markets, provide investors with a comparatively safe harbour from the problems of trade disputes and currency fluctuations that currently dominates the news from the region.
“This resilience is reflected in the results for the last 12 months. There are great opportunities in the small cap area in Asia and I much look forward to leading the team in our quest to both focus the existing portfolio and find the companies that will drive the growth for the future.”
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