To borrow from the oft-repeated Chinese curse, the portfolio managers of many Asian funds in particular find themselves “living in interesting times” as the tariff war between China and its regional neighbours and the US continues to play out.

However, for funds and investment trusts with a focus on domestic Asian or global demand, the negative impact of US tariffs is likely to be limited in terms of corporate fundamentals. The portfolio of the Aberdeen Asian Income Fund (AAIF) occupies such a relatively robust position, as manager Eric Chan explains.

“Only about 15% of our portfolio investments are affected by these tariffs, and even then the impact is minor because US sales make up only a small part of their overall revenue,” he says.

Heightened unpredictability under this new regime means Chan and the team are of course keeping a close watch on trade developments. But, he says: “I remain confident of the growth prospects of our portfolio companies, which have historically demonstrated defensiveness in challenging times.”

AAIF consists primarily of dominant domestic champions and global market leaders, and these “are better able to navigate volatile periods, while having the business models, balance sheets and cash flows to continue paying attractive dividends”

Portfolio examples include Telstra Corporation, an Australian telco that remains unaffected by the tariffs, and Fuyao Glass, a Chinese auto glass manufacturer that makes most of its US sales from a plant in the US, thereby minimising the tariff impact.

Resilience rewards

In such an uncertain environment, the trust’s focus on quality companies becomes all the more significant. Not only should these businesses be more resilient in the face of direct and second-order fallout from tariffs, but they are more likely to be able to find ways to maintain their strong growth trajectories notwithstanding.

Indeed, says Chan, periods of market dislocation work in the team’s favour, in that they open up opportunities to take positions in robust, attractive companies that can improve the quality and yield potential of the portfolio.

In this respect, one crucial stock-picking strength for the trust is the fact that Aberdeen’s investment teams are locally based across Asia and are familiar with the businesses they’re analysing.

As Chan observes: “Our on-the-ground presence and extensive network of over 40 in-house analysts and fund managers across Asia provide us with valuable insights to identify and invest in quality companies, particularly during these volatile and uncertain times.”

How successful has AAIF’s approach been? The turbulence of the past months makes it hard to draw meaningful comparisons over the shorter term, but investing in investment trusts requires a long-term perspective. On a five-year perspective to 23 April 2025, AAIF outperformed its peer group (Morningstar IT Asia Pacific Equity Income) in total return terms, achieving annualised NAV returns of 8.3% (peer group 7.8%) and annualised share price returns of 9.4% (peer group 8.7%).

Rich pickings for income investors

Asia remains a particularly fertile hunting ground for income-seekers, with dividends now accounting for more than 50% of total returns in the region; dividend growth in Asia, meanwhile, outpaces that in both the US and Europe.

So, the goal for AAIF’s team is to find companies that not only provide capital growth but are also able to pay increasingly attractive dividends that will contribute to the portfolio’s rising income target.

Indeed, AAIF’s board has recognised this focus on a consistent, growing income stream over time as a key investment consideration for the many private shareholders reliant on investment income.

Enhanced dividend policy boost

To that end, the board announced in January 2025 that AAIF is adopting a so-called enhanced dividend policy.

This means it has committed to a regular annual dividend payment to shareholders, in AAIF’s case worth 6.25% of its average NAV.

Given subsequent share price volatility, as at 31 March this translated into a notional dividend yield worth a competitive 7.7% for new investors.

The move also cements the position as an AIC Next Generation Dividend Hero committed to rising dividends, with 16 consecutive years of payout increases under its belt.

But the new dividend policy does not involve any change in the way the portfolio is run. The team continues to look for high-quality, cash-generative companies with strong management teams, at sensible valuations.

Ultimately, despite the painful disruption suffered by investors globally in recent months, it remains the case that Asian markets offer attractive long-term investment opportunities, and that AAIF is strategically placed to cash in on them.

Isaac Thong becomes lead manager of AAIF

As Aberdeen Asian Income Fund heads towards its 20th birthday later in 2025, there’s new blood on the AAIF team, with the appointment of Isaac Thong as lead manager.

Isaac, based in Singapore, replaces Yoojeong Oh and will be working alongside portfolio manager Eric Chan. He has more than a decade of experience in Asian equity investment, most recently as an emerging markets portfolio manager at JPMorgan Asset Management.

Ian Cadby, chair of the AAIF board, highlighted his “excellent track record” in Asian and emerging markets equities. “With Asia poised to drive global economic growth, Isaac’s expertise will be instrumental in navigating this dynamic landscape,” he added. 

Trust information

Investment objective: To provide investors with a total return primarily through investing in Asia Pacific securities, including those with an above average yield. Within its overall investment objective, the Company aims to grow its dividends over time.

Discrete performance (%)

(A) Including current year revenue.

Total return; NAV to NAV, net income reinvested, GBP. Share price total return is on a mid-to-mid basis.

Dividend calculations are to reinvest as at the ex-dividend date. NAV returns based on NAVs with debt valued at fair value.
Source: Aberdeen and Morningstar.
Past performance is not a guide to future results.

Important information

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG, authorised and regulated by the Financial Conduct Authority in the UK.

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