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Aberdeen plans to swap All Asia for Japan

Aberdeen is proposing to change the mandate on its Aberdeen All Asia investment trust to focus exclusively on Japan.
Yasaka Pagoda and Sannen Zaka Street in the Morning, Kyoto, Japan

Under the plans the trust will be renamed the Aberdeen Japan investment trust. The group also plans to raise new capital by way of a placing an offer for subscription of up to £100m of C shares at an issue price of 100p per share. The trust’s yen exposure will be hedged back to sterling.

The group believes changing the mandate will broaden the trust’s appeal, with many investors looking for either an Asia ex Japan or Japan-only strategy.

The trust’s current market capitalisation is just £51.2 million and liquidity of the Ordinary Shares in the secondary market is limited, which, it said, inhibits the Company’s ability to attract larger investors.

It said in a statement: “Demand for the Company’s shares has not increased significantly. In the Board’s view, appetite for the Company’s current investment mandate combining Asian with Japanese stocks has weakened over the years and it has been difficult to attract new investors. Many prospective investors, especially private wealth managers, wish to be responsible for their own allocation between Japan and Asia and are therefore more inclined to invest in investment vehicles which are either focussed on Asia excluding Japan or are entirely Japan focused.”

Sector comparison

The trust’s performance has been weak relative to the Aberdeen All Asia investment trust sector. There are only three trusts in the sector, but the trust has delivered a NAV performance of 62.2% over five years, compared to an average of 64.5% for the wider sector. Over one year, NAV is up just 9%, compared to a rise of 19.4% for the other trusts.

The trust will be run by the Asian equities team, using the Aberdeen ‘Singapore’ process devised by Hugh Young. The Japanese equities team is headed by Chern-Yeh Kwok.

Japan is currently the largest single country weighting in the trust, but at just 23.7% of overall assets, the change will require significant portfolio turnover. Aberdeen already has an open-ended Japanese Growth Fund, which is top quartile over three and five years, having delivered returns significantly ahead of the wider sector over both time periods.

The trust currently trades at a 6.7% discount to net asset value. The top performer in the Japan Equities investment trust sector is the Baillie Gifford Japan Trust, which currently trades at a premium of 4.4%. The other two trusts in the sector, the JP Morgan Japan Investment trust and the Schroder Japan Growth trust trade at discounts of 8% and 6.5% respectively.

Part of the Mark Allen Group.