Hi, my name is Isaac Thong. I am lead manager of the Income Trust. I spent the last 15 years investing across Asia and emerging markets. The last 12 were spent at JP Morgan Asset Management, and the last 6 were really spent managing the Emerging Markets Income Trust, which was highly rated by yourselves, I understand. So thank you very much for that.
Personally, I am Singaporean. I’ve been born and raised in Singapore and I’ve experienced first hand Asia’s amazing growth story. I am a key beneficiary of that—that’s probably why I’m sitting here today. This competitive advantage and natural inclination really makes me very excited about Asia and all that there is to offer in those markets, and I’m personally really drawn by it.
Style-wise and investment-wise, what I really want to do is invest in high-quality businesses at reasonable valuations. This makes Aberdeen a very natural home for the way I do things investment-wise. At Aberdeen, we have 40 investment professionals sitting in Asia. They live and breathe this Asian growth story day in, day out.
We also have a very strong investment process that has been sharpened over many decades. In fact, our investment process has been in place since 1987 out of Singapore, and this continues to be the case. This investment approach really focuses on finding high-quality management as well as high-quality businesses and really backing these companies over the long run. And I think that really fits what I’m trying to do.
First and foremost, our investment strategy is grounded in Asia’s amazing growth story. Asia has and will continue to generate more than 50% of global GDP growth. More importantly and crucially, this strong economic growth in Asia has resulted in superior total shareholder returns over the last 20 years. The trouble is, I think a lot of people have lost sight of that story over the last five to ten years because of things like US exceptionalism.
But going forward, we believe the markets are going to start remembering Asia’s strong growth story. However, Asia’s strong growth also comes with a wider range of outcomes.
We acknowledge this, and we think that a balanced approach to unlocking Asia’s growth is absolutely essential. It’s no surprise then that dividends have driven more than half of Asia’s total returns, and we think that will continue to be the case.
For us fundamentally, our focus is on identifying and investing in high-quality dividend franchises and really backing these companies over the long run.
It is true that Asia has experienced some volatility policy-wise over the last couple of years. What we seek to do for the Trust is to generate superior returns by picking great companies and backing them over the long run. What we do not want to do, though, is to invest based on policy direction or macroeconomics.
However, we do realize that macroeconomics pose certain risks for the portfolio, and we try to minimize these risks either at the portfolio level or at the company level. At the portfolio level, what we do is run relatively conservative country active positions. This minimizes macro factor risk. At the company level, we ensure that the businesses we hold are sufficiently diversified.
Let me give you an example. Despite the current backdrop of US tariffs, we do own Chinese consumer companies. These consumer companies are sufficiently diversified—they are domestic champions in consolidated industries and are really domestic-facing in that they derive significant parts of their revenue from the Chinese consumer. These companies also have very little exposure to US exports.So we mitigate macro factor risk at both the portfolio level and the company holding level.
After we have identified high-quality dividend franchises, what we really want to do is invest across a spectrum of dividend yields. What this does is allow us to participate in companies across various stages of their corporate life cycles. This also helps us balance risk across the fund while ensuring we generate superior total returns.
Let me give you an example. If we invest in a lower-yielding stock, our requirements for their long-term earnings growth would be higher. And vice versa, if we invest in a higher-yielding stock, our requirements for earnings growth would be minimal.
Let me give you a further example, in our portfolio, we invest in Tencent. Tencent is a high-growth internet platform in China and is also a leading games developer there. It has a low yield of about 1%, but we think earnings can compound at 10 to 11% going forward.
On the flip side, we have DBS, a more mature Singaporean bank with yields of about just south of 7%. If you look at both stocks from a total shareholder return perspective, they actually look about the same. Both companies are high-quality in our view and pay out a healthy amount of dividends. We think both stocks will remain core parts of our Trust.
Thanks for your time and for listening to this update. If you require any more information, please refer to our website.
