Trading on a premium - are they issuing stock


#1

It’s on a small premium of 2.3%. I wonder if they’re issuing stock?

It seems to have snuck under the radar this trust, Aberdeen and First State dominate here but the performance is good if you’re looking for income. 5.3% yield. I wonder what the reserves are?

Everyone has UK and maybe US equity income funds or investment trusts, buying this diversifies your income risk no?

I’m trying to think if reasons not to buy this for my Mum who has an income need (rather than a capital preservation need).

 

 


#2

Hi @CityGirl, HFEL does have an active discount control in place and the results can be seen in the RNS releases titled ‘Issue of Equity’ available from on the AIC and LSE web-sites (others too , no doubt).

Interestingly, Edison’s downloadable research note answers your reserves question (PDF): http://www.edisoninvestmentresearch.com/?ACT=18&ID=11224

I would class Aberdeen Asian Income and Shroder Oriental Income as being the realistic alternatives to HFEL. HFEL does boost the yield by writing options and this - theoretically - should limit the capital upside. But from an income perspevite, that is likely to be lower priority. It could mean a higher level of turnover of assets too, if there is forced selling due to an option being exercised: this has been an observation/criticism over on TMF. But again, that might be thinking in terms of total return rather than income return.

What I do see with the three of them is that there are times (and timescales) where one has outperformed the others - in TR terms - so you takes your pick as to which one suits. I hold AAIF myself, which I first bought at its IPO.


#3

Thank @arkwelder reserves of 67% of dividend which is none too shabby.

I am looking to invest for income so capital growth is more of a bonus.

Thanks again Ark you’re a star as always :slight_smile:


#4

It’s on my radar as well @citygirl and @arkwelder. I’m not too keen on buying on a premium but that’s the price for income these days.

The manager seems quite level headed if a bit dour (probably not a bad thing with a fund manager) and tells a reasonable story. The Aberdeen and Schroder trusts are good too as Ark says and I’ll have a look at them too but I like the performance of this trust.

He talks about what he’s investing in in the videos on the right of the following page. They’re not too long so they don’t send you to sleep:

 

 

 

 


#5

@citygirl

I’ve held both AAIF and SOI for a while, I think both these are slightly better rated by Morningstar but HFEL isn’t too bad.

As with most Aberdeen AsiaPac trusts AAIF is going through a dull patch at the moment but long term performance is good.

Relatively recent article in Money Observer mentions all three -

http://www.moneyobserver.com/our-analysis/five-investment-trusts-treading-tightrope

For other income diversification you could consider UEM or JEMI - I’ve held UEM for a number of years.


#6

Thanks Jim or @scjim and sorry for the late reply. Been hanging out with the lions and hippos on the other side of the world, hence the response at 1:30am, maybe just a little bit jet lagged still.

The Money Observer article is timely and they do seem (the three Asian income trusts I mean) to be a wee bitty similar in terms of performance but I watched a couple of Youtube videos of the Henderson Far East Income manager (oh you know how you and @arkwelder use all these fab acronyms for trusts, I want to do the same but keep forgetting them!), he seemed dour and a wee bit mean which is what I want in a fund manager so I reckon I’m gonna invest a little with him.

I’ll invest some for my little niece too. We have a junior ISA for her and she takes the income for her pocket money, it’s so sweet.

:slight_smile:

 

 


#7

I hold AAIF and HFEL. They complement each other nicely. The former has little China exposure, so it has underperformed over the past year, but has a good long term record.


#8

Hello @CityGirl. Have you swapped the twinkling lights of the city for the sun twinkling off the water?!

 

I recommend AAIF and HFEL to clients and have done for ages. HFEL has only been ranked below the others because of slower capital appreciation, IMHO. I think he got into trouble in Australian holdings and other very southern Asian positions a while back. Moving as expected now though and it does bang out the highest yield of all of them. If you are after yield first then this is for you. AAIF is better if you want capital growth as well, and someone has already pointed out that over the long term there is little in it between SOI and AAIF.


#9

I hadn’t though that they may be complementary. Maybe I’ll look at both Henderson Far East and Aberdeen Asian Income, thanks for the tips @james-pigott and @rogerdecrecy.

I’m not investing in income to draw upon it, I like to reinvest it but my Mum needs income funds to draw down and it’s mainly for her I’m investing.


#10

Sorry @CityGirl, I did not mean they were complimentary per se, although if you want a large Asian holding it would help to spread among the top trusts. Clients like your Mum would have HFEL and those, like you, would have AAIF. Hope that’s clearer!

I’ve have SOI on my list to review but as yet not had the time or need.