Invesco Asia Trust (IAT) has marked the year of its 20th anniversary with the appointment of Ian Hargreaves as sole manager and the adoption of the MSCI AC Asia ex-Japan index as its benchmark. The trust continues to seek capital growth from a portfolio of attractively valued Asian companies, and retains a small weighting in Australia. Long-term performance remains strong in both absolute and relative terms; while the sharp summer sell-off that began in China has had an impact on short-term numbers, the manager is finding growing companies on attractive valuations as a result. IAT has a 2.1% yield and an established record of year-on-year dividend growth.
From 1 January 2015 IAT has been managed solely by Ian Hargreaves, although the manager is still able to draw on the input of former co-manager Stuart Parks, Invesco Perpetual’s head of Asian equities, as well as the wider Asian team. The investment approach combines stock picking with top-down macro views to build a portfolio of c 60 stocks that the manager feels have strong competitive advantages and are undervalued compared with their growth prospects. Regular visits to the region help the manager identify high-conviction investment ideas, and the portfolio is constructed with minimal consideration of benchmark weightings.
Asia has underperformed Western markets in recent years, accelerating in the late summer on fears over the outlook for growth in China. Uncertainty over the timing, pace and level of US and UK interest rate increases could see investors continuing to favour developed markets in the near term; however, valuations in many Asian markets look favourable in a global context and there may be opportunities for outperformance through careful stock picking.
At 23 November, IAT’s shares traded at a 10.7% discount to ex-income net asset value, broadly in line with averages over one, three and five years. Following a widening at the start of 2012, the discount has largely remained in a relatively tight range of 8-10% as investors have tended to favour developed over emerging markets; given IAT’s solid performance record, there is scope for it to narrow should sentiment towards Asia improve. The board targets an average discount of maximum c 10% on an ex-income basis, and is active in pursuing this through buybacks, providing confidence that any material widening from current levels is unlikely.