On a cumulative basis over 10 years, 40 per cent of the top-10 performing investment trusts are focused on the Asia Pacific region, with a further 30 per cent exploring emerging markets, the investment trust trade body said.
Topping the table for 10 years to January 22 is the Aberdeen Asian Smaller Companies trust, managed by the firm’s Asian equities team, which is headed up by veteran investor Hugh Young.
The £343.7m trust has returned 770.4 per cent in the past 10 years, more than triple the Asia Pacific excluding Japan sector average.
Hot on its heels – and another Aberdeen-managed trust – is Aberdeen New Thai, which has returned 711.9 per cent. This trust sits in the Country Specialist Asia Pacific sector and also comes under the leadership of Mr Young.
Winterflood Securities’ annual review of 2012 noted a significant increase in exposure away from the UK to Asia and the emerging markets.
Completing the top 10 were trusts from the UK Smaller Companies, Country Specialist Europe and the Commodities and Natural Resources sectors.
Simon Elliott, analyst at Winterflood Securities, said: “Investment trusts are not simply a geared play on the UK market, as the underlying exposure of the sector’s assets is quite distinct.
“There has been an increasing trend away from western economies for some time and we estimate that roughly 35 per cent of the sector’s assets are invested in UK stocks.
“Asia ex-Japan and emerging markets represent approximately 24 per cent of the sector’s geographical exposure.”
The review also showed a widening of discounts towards the end of last year for both the emerging markets and Asia ex Japan sectors, which it stated was “due to an overhang from institutional selling”.
However, Mr Elliot added that “discounts remain relatively stable”, reflecting investors’ “continued demand”.
And while 2012 was another good year for Asian equities, Andrew Gillan, manager of Edinburgh Dragon Investment trust, has warned that “earnings have lagged behind share prices”.
He added: “There was single-digit earnings growth last year and roughly 20 per cent returns on share prices, hence valuations today are slightly higher than they were 12 months ago.”
Trust managers’ views on 2013 for Asia Pacific
Mike Gush
The manager of the Pacific Horizon investment trust said he remained upbeat about the medium-to-long-term prospects for companies where the time between investment and profit was “protracted and unpredictable”.
“Several of these are found within the energy and IT sectors where there has been significant deratings and, in some cases, sharp share price falls,” he said.
“2013 may prove a rare opportunity for long-term investors to gain exposure at discounted levels to innovative companies.”
Ian Hargreaves
The manager of the Invesco Asia trust said “valuations in the region look reasonable and, if anything, are below long-term averages”.
“If the global backdrop remains stable, there is room for some rerating, and with earnings growth in high single digits, 2013 could provide reasonable returns for equity investors.
“But the main risks to this promising outlook is from outside the region – in particular, developments in the eurozone and ongoing arguments regarding the fiscal situation in the USA.”
Mike Kerley
Mr Kerley said valuations remained below long-term averages and had derated in the past two years as equity indices had “failed to keep pace with corporate earnings”.
“Global interest rates are likely to remain low and, combined with the abundant liquidity provided by central banks, everything is in place for equities to perform.
“Especially important is…China, where economic data and forward-looking indicators are suggesting that the direction of growth will be positive in 2013.”
How Asia Pacific trusts stack up against the trust universe
The Asia Pacific ex Japan sector has delivered a strong 452.5 per cent in 10 years to December 31 2012, far outstripping the
average investment trust return of 284.4 per cent, according to the Association of Investment Companies.
