Aberdeen Asian Smaller Companies Investment Trust claims this award for the second year in succession, keeping the only other smaller company specialist in the region in second place.

Total assets shot up from £267 million to £416 million in the course of the year, partly due to the strong growth in its share price and partly to regular issues of new shares at a premium, which give a small boost to net asset value (NAV) per share and enhance liquidity. Manager Hugh Young does not expect the trust’s increased size to inhibit its investment flexibility. The trust has maintained a concentrated portfolio, with around 67 holdings, and Young says it has plenty of choice.

“In theory there are many thousands of companies with market capitalisations of less than $1 billion (£644 million), which are therefore eligible for selection. In practice we have identified about 500 which might be candidates. We are finding new companies but at the same time we are losing companies as they move up the size scale, so the numbers are remaining roughly the same.”

Young adds: “We only hold stocks we want to hold and frankly would turn money away if we ever felt we were being forced to buy anything we did not like.”

Young’s Singapore-based team applies the same selection criteria to companies regardless of size: zeroing-in on proven management, robust balance sheets and sustainable businesses. Turnover is very low, with some stakes having been held since launch. It is value-aware, however, so has been taking profits on some of its consumer-related holdings because they have performed so well.

Turning to share valuations, he says the strong rise in smaller company prices has not been fully supported by rising earnings, with the result that prospective price/earnings (P/E) ratios are up to 16 times. This compares with a prospective P/E of 15 times on companies in the team’s mainstream trusts, yet smaller companies are not growing their earnings any faster.

The main emphasis is on companies in south-east Asia, in particular Malaysia, Thailand and Singapore. Its only exposure to China is through Hong Kong-based companies.

The trust is 9% geared and all its assets are currently deployed in equities.

Highly commended: Scottish Oriental Smaller Companies Trust

Scottish Oriental Smaller Companies Trust has had a great run since Susie Rippingall of First State Stewart took the lead role in October 2000. As with the winner in this category, it has a fabulous long-term record, with its net asset value increasing more than sevenfold over the past 10 years.

Rippingall stepped down as manager in April, but this is not expected to cause significant disruption as co-manager Scott McNab remains en poste. He is now sharing responsibility with Angus Tulloch and Wee-Li Hee. Tulloch, one of the most respected Asia fund managers, heads the First State Stewart team, and was manager of the trust from 1995 to 2000.

Hee has been with the team since April 2002 and has worked closely with Tulloch since April 2005. The main concern about the changeover is that all three of the team are based in Edinburgh, whereas Rippingall was based in Hong Kong.

Although SOSCOT has a sizeable exposure to China, Taiwan and South Korea, it has almost nothing in India. It has been issuing new shares, but has been cautious about investing the proceeds on the grounds that sentiment towards Asian equities has been overly optimistic.

The team suggests prospects for export-related companies remain clouded by eurozone problems, and better prospects for Asian consumer companies are largely factored into stockmarket valuations.

By Fiona Hamilton (Money Observer)

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