Indeed, during such periods it can be quite a challenge for actively managed funds and investment trusts such as Aberdeen Equity Income Trust (AEI) to actually beat the market and outperform index tracker funds, when the stock of even mediocre businesses is being carried on that rising tide.

But now is not one of those times, and nor are the coming months likely to get easier for investors.

President Trump has thrown global trade into chaos with the imposition of brutal tariffs on exports to the US worldwide; that’s compounded by profound uncertainty as to what he’ll announce tomorrow, let alone next month.

It’s a time when worried investors need to be able to take comfort from their fund’s inherently robust structure and philosophy of resilience. As Chair of the board of AEI, I believe our investment trust ticks those boxes in several respects.

Stock-picker strength

For a start, these are circumstances when bottom-up, stock-picking managers can really prove their worth.

Because they focus on building a portfolio by assessing the fundamentals of each company in their universe, good managers can identify high-quality businesses with the robust balance sheets, experienced management teams and market strength to thrive regardless of short-term macroeconomic noise.

AEI has an additional advantage in this respect, in that unlike many peers its managers are not confined to a specific segment of the stock universe - large companies, for instance – or obliged to follow a particular index.

Instead, the team adopts an all-cap, index-agnostic strategy, which means it can look in places where others cannot go, including those under-researched parts of the market where interesting opportunities are most likely to be uncovered.

Nor is the investment process merely a matter of ploughing cash into a portfolio of stocks and stepping away. We believe that working with the companies we invest in and engaging with them on an ongoing basis is crucial to ensure high-quality corporate governance.

Though we are not a dedicated ESG fund, we concentrate specifically on governance, on the grounds that companies with strong governance in place should be well-run and are therefore less likely to slip up on environmental or social issues.

That focus on corporate engagement and on fostering a robust ESG culture in the portfolio of companies helps AEI both to generate stronger returns and to manage risk effectively.

Inherent income advantage

Historically, stocks that pay a decent dividend have been an attractive proposition in times of market turbulence, because that regular income provides compensation for investors when capital growth is hard to find.

A regular and consistent income is particularly important for older investors who already depend on it to supplement their pension, of course. But even if you’re still decades away from retirement, those additions to your portfolio, help to boost compounded returns over the long term.

As an equity income investment trust, AEI currently pays a meaty yield of around 6.5% (as of 9 June 2025). Moreover, because it is structured as an investment trust it has an inherent advantage in terms of income consistency, although do remember of course that future dividends are not guaranteed.

Unlike open-ended funds, it is allowed to hold back up to 15% of the dividends paid by its portfolio companies each year, and those reserves can be used at the Board’s discretion to boost dividend payouts to investors in leaner years.

This capacity makes it much easier for investment trusts with an income focus, like AEI, to provide a reliable income stream, maintaining or growing their dividend distributions year on year.

Indeed, the Association of Investment Companies (AIC) has recognised those trusts with outstanding records in dividend growth, highlighting the small number with more than 20 consecutive years of rising dividends as Dividend Heroes.

AEI, with 24 years of payout growth now under its belt, makes the cut as a Dividend Hero - an achievement of which the board and managers are justly proud, and which itself helps cement dividend reliability as a key feature of the fund, as well as currently trading at a premium.

Engaging with our shareholders

Growing numbers of individuals these days are hands-on investors, utilising user-friendly investment platforms such as interactive investor to run their portfolios themselves, rather than paying an intermediary to do it for them.

It’s therefore becoming more and more important for the boards of investment trusts to reach out to their private shareholders and encourage them to be actively engaged with the big questions facing their investment trust. That means asking questions, holding the managers and board to account where necessary, and voting when the opportunity arises.

At AEI, we are making a concerted effort to engage with our shareholders and understand as much as possible their perspectives on their investment. For example, I am really keen to know how important income consistency is to them.

The most obvious opportunity to get to meet and talk to shareholders is at the annual general meeting (AGM). The Board warmly encourages shareholders to attend the AGM, but we appreciate that it’s not convenient for everyone.

To address this, we hold a very well attended pre-AGM webinar with a live Q&A, and we’d love to hear from as many shareholders as possible through that route, if they can’t make the AGM itself.

Investors can also sign up for regular email updates through the website here. I want to get the message across that AEI belongs to all its shareholders - and everyone has a stake in its resilience and success, year in, year out.

Trust information

Investment objective: To provide shareholders with an above average income from their equity investment while also providing real growth in capital and income.

Discrete performance (%)

Source: Aberdeen, total returns. The percentage growth figures are calculated over periods on a mid to mid basis. NAV total returns are calculated on a cum-income basis. Past performance is not a guide to future results.

Important information
Risk factors you should consider prior to investing in AEI (The Company):

Other important information:

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

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