UK Edition
Questor: this is a good fund – but we’ll sell it for a rival that trades at a 10pc discount
Questor investment trust bargain: Fidelity Asian Values has made 30pc for readers but has gone to a premium. Our new pick has been given a makeover and trades at a discount
Sometimes even investments that are performing well should be sold if a better home for the money presents itself. This week we sell a trust that has made good gains because an interesting opportunity has arisen to switch to a similar fund trading at a far wider discount.
We tipped the fund we will sell, Fidelity Asian Values, in December 2016 at 324p when it was at a discount of about 11pc. Since then the shares have gained 29.5pc.
We said at the time that good performance from the recently appointed manager, Nitin Bajaj, could cause the discount to narrow and so it has proved: in fact it has given way to a premium of 3.8pc.
Bajaj delivered a 55pc total return (on the basis of net asset value rather than share price) between his appointment in July 2015 and this time last month. By contrast, its benchmark, an index that includes all Asian countries except Japan, gained 41pc. The trust also outperformed its closest peers over the period, according to analysts at Winterflood, the broker.
They added that Bajaj’s approach remained unchanged, “investing in quality companies with good management teams at attractive valuations”, and that he had “a rigorous procedure in place to select stocks”, which included the scrutiny of 15-20 years of accounts to check that each business had generated value in the past.
All the signs are that he is a good manager and his trust a solid investment, and readers who prefer not to change their portfolio can rest easy if they decide to hold on to it. However, those who wish to seek out every potential source of gains may want to switch to Aberdeen Standard Asia Focus.
This trust, which until recently was called Aberdeen Asian Smaller Companies, trades at a discount of 9.9pc, which may reflect indifferent recent performance. However, to coincide with the change of name it appointed Hugh Young as lead manager and said it would make the portfolio more focused.
Young, as mentioned in yesterday’s column, is one of Britain’s most experienced and respected emerging markets investors and he will be responsible for the trust’s day-to-day investment decisions. The number of holdings will be reduced from around 80 to 60, with 30 “core” holdings, bringing “a sharper focus to the investment process”, the trust said.
In light of these changes and the discount gap, we advise a switch from Fidelity Asian Values to Aberdeen Standard Asia Focus.
Questor says: sell Fidelity Asian Values, buy Aberdeen Standard Asia Focus
Tickers: FAS, AAS
Share prices at close: 419.5p, £10.40
Investment trust news
Four investment trusts managed by Baillie Gifford have cut their fees.
The amount the asset management firm charges to run the four portfolios, Baillie Gifford Japan, Baillie Gifford Shin Nippon, Edinburgh Worldwide and Pacific Horizon, is now 0.75pc for the first £50m of net assets, then 0.65pc on the next £200m and 0.55pc on assets of more than £250m. Previously the charge on the first tier was 0.95pc.
The change, which took effect on Jan 1, will save each of the trusts £100,000 a year. The firm said the funds had grown strongly and had been issuing new shares. “We are keen to pass on the benefits of increased scale to shareholders where possible,” a spokesman said.
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Invesco Asia plans to increase the dividend in future, using its revenue and capital reserves if necessary. It has introduced an interim dividend. The board said it would “seek to utilise buyback powers on a judicious basis” to address the discount and would use gearing (borrowing to invest) more actively to take advantage of the investment trust structure.
It said its intention was to “reduce gradually the level of ongoing charges over time” and a 0.65pc tier of the investment management fee will be introduced for assets of more than £250m. The current fee is 0.75pc and net assets stand at about £212m.
NB Private Equity has announced a first dividend for 2019, which is 12pc higher than at the same time last year. It said it had sold more of its fund investments in order to focus on directly held private equity assets. A new share buyback policy has been approved.
- Questor archive: telegraph.co.uk/questor