INVESCO ASIA TRUST: Legwork is the secret to success

Invesco Asia Trust seeks out companies across Asia with potential to grow, but that have been overlooked or undervalued by others. It aims to buy them up at a good price and then hold on until the market realises their true value. 

The strategy seems to be working. A £1,000 investment in the trust three years ago would be worth £1,342 today – well above the average for similar trusts. 

The secret to its success? Legwork, says investment manager Ian Hargreaves, who heads up a team of seven at Invesco’s office in Henley, Oxfordshire, while co-manager Fiona Yang works from Singapore. 

The nine-strong team have around 600 to 700 meetings with companies between them every year. ‘I have around 20 meetings this week alone,’ says Yang. 

‘Most of the time we do not end up investing in the companies we meet, as we only have around 50 to 60 in the portfolio at any one time. But sometimes we find one that shows great promise.’ 

Yang and Hargreaves believe Asia offers an interesting proposition to UK investors at the moment. While the UK, Europe and the US battle against rampant inflation, countries such as China, India, Indonesia and South Korea are not so badly hit. 

Hargreaves says: ‘The lower inflation reflects the fact that we didn’t see anywhere near the same level of stimulus in Asia as we saw in other parts of the world. That means that now there isn’t the same need for monetary policy to react to curb it.’ 

Of course, the region is not without its own issues, such as China’s recovery from strict Covid lockdowns and India’s exposure to the high price of oil as it is a big importer. However, the fortunes of companies in Asia do not tend to move in step with those in the UK, Europe or US so may offer some balance in a well-diversified portfolio. 

The trust can invest in companies of all sizes and sectors and across the whole region, except for Japan. That means that Yang, Hargreaves and the team have free rein to seek out the companies with the most potential. ‘What we focus on is finding value,’ says Hargreaves. ‘We want to find good quality companies, but at the right price.’ 

One such find has been Indian vehicle manufacturer Mahindra & Mahindra. ‘The company is an excellent manufacturer of tractors and cars,’ says Yang. 

‘But when we bought in 2019, the share price was depressed because of the direction the company was heading in. 

But we thought everything that could go wrong had gone wrong and that the company was ready to make changes. We spoke to its new management team and liked their new strategy and bought in.’ 

The share price has more than doubled since. Yang believes the company has potential to develop further still as it is working on manufacturing an electric vehicle. 

Hargreaves has been involved with the trust since 2006 and headed it up since 2012. 

He believes the long-term perspective brings benefits. For example, when Taiwanese semiconductor company MediaTek was slower to launch its 4G-ready chips in 2017, many investors lost confidence and its share price fell, says Hargreaves. 

‘However, because we had known the company for a long time we knew its capability. We were rewarded for investing as the company has bounced back and been very early to market with its 5G technology.’ 

The share price is now over three times higher. 

The trust pays a dividend of around 4 per cent. Its stock market ID code is 0453530 and its ticker IAT. Annual charges total one per cent. Shares currently trade at a discount of 14 per cent.