Aberdeen's All Asia trust to switch to "Japan-only" mandate

The board of the £60.7 million Aberdeen All Asia Investment Trust has announced proposals to change the company's investment policy to a "Japan-only" mandate.

If the proposals are approved by shareholders, the directors plan to change the name of the company to Aberdeen Japan Investment Trust.

Chern-Yeh Kwok, head of Japanese equities at Aberdeen Asset Management, says: "The change of stance towards the economy from the Japanese government bodes well for investors and companies alike.

"Affirmative fiscal and monetary easing, coupled with structural economic reform, should lift the country and progressively reverse the economic stagnation with which we have become all too familiar."

Kwok believes there are good quality companies in Japan in robust financial condition, trading at attractive valuations.

He adds: "Whilst the region is not without uncertainty, Japan should offer shareholders the potential for significant returns in the medium to long term."

The trust's directors plan to raise new capital, proposing up to £100 million of C shares at an issue price of 100p per C share.

The trust's board says it acknowledges, while the investment opportunities in Japan are good, performance in sterling terms of some of the company's portfolio may be subject periodically to significant fluctuations because of changes in the value of the Yen.

In a statement the board says: "The proposed new investment policy provides for the board to arrange an appropriate hedge for the company's underlying Yen net exposure in sterling terms."

Over one year, the Aberdeen All Asia Investment trust has returned 17.2% compared with 17.4% return for the IT Asia Pacific including Japanese equities as at 10 September.

Analyst view

Ewan Lovett-Turner, associate director of investment research companies at Numis Securities, says he agrees with the board "that the fund is currently subscale, and that it will be difficult to attract significant demand with the current Asia, including Japan mandate".

He explains: "Investors can already gain exposure to Aberdeen's Asia ex Japan equity team via a number of investment trusts (including Edinburgh Dragon and Aberdeen New Dawn), whilst Aberdeen also manages part of Witan Pacific's portfolio via a pan-Asian approach."

Lovett-Turner believes that most investors prefer to retain control of their asset allocation and invest in either Asia ex Japan or Japan, with the pan-Asian mandate only coming into favour when both regions are performing strongly.

He adds: "The Japanese market has risen 32% in sterling terms over the past year and by 66% in local currency terms. Many investors still have relatively little exposure to the market and we believe that an actively managed vehicle, with hedged Yen exposure, may prove attractive."