Aberdeen Global Asian Smaller Companies Fund research update
Kate Marshall | Thu 28 July 2016
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- Aberdeen’s Asian equities team seek undervalued, quality companies
- Recent performance has improved following a short-term period of underperformance
- We continue to favour their long-term, disciplined investment approach
The Asian equities team at Aberdeen are well-known for their meticulous research and disciplined investment approach. They are unyielding in their quest to find only the highest-quality companies, which they can purchase at sensible valuations.
The team have built an exceptional long-term track record investing in Asian markets, although their Aberdeen Global Asian Smaller Companies Fund went through a more challenging time from mid-2013 until the start of this year. We recently met Hugh Young, managing director of Aberdeen Asia, to discuss the fund and its performance in more detail.
A lack of exposure to stronger-performing Taiwanese and Chinese technology and internet-related companies held back returns in 2013. The team avoided many of these businesses as they have not met their strict quality criteria and corporate governance standards. Some investments in Singapore and Thailand, particularly property-related firms, also dragged on returns. 2014 was a better year for the fund, although last year a bias to South East Asian nations, including Indonesia, Thailand and Malaysia, hurt performance.
So far this year, exposure to countries such as Indonesia has contributed positively to performance; the share price of brewing company Multi Bintang, for example, was particularly strong. A bias to the financials sector also helped, including an investment in Dah Sing Group, a financial services firm based in Hong Kong.
The team take a truly long-term approach to investing, meaning significant changes to the portfolio are made infrequently. They have, however, recently initiated a position in Tong Ren Tang Technologies, a traditional Chinese medicine manufacturer with well-known brands and a strong distribution network in China.
Our view on this fund
Following a short-term period of weaker performance, the fund has outperformed its benchmark so far in 2016. We recognise all managers go through periods of underperformance and we maintain conviction in the team’s long-standing investment approach. It has been applied consistently for many years and delivered strong long-term results, although past performance is not a guide to the future. Please also note that investing in emerging markets and smaller companies is a higher-risk approach.
Asian stock markets have recently performed well, partly as the weakness of sterling has boosted the returns from overseas assets for UK investors. That said, we continue to believe Asian markets represent good value and offer exciting long-term growth potential.
While we remain positive in our outlook, Aberdeen is not actively seeking new money into this fund at present. As such, the fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.
Please note as this is an offshore fund you are not normally entitled to compensation through the UK Financial Services Compensation Scheme.
Find out more about this fund including how to invest
Please read the key features/key investor information document in addition to the information above.