The Aberdeen investment approach – an eye for potential, an ear to the ground

Aberdeen Emerging Markets Investment Company is a closed end fund listed on the main market of the London Stock Exchange. It offers investors exposure to some of the best investment talent available within global emerging markets (Asia, Eastern Europe, Africa and Latin America) by allocating to highly experienced managers. Investing through closed end funds is a particular focus due to the significant benefits of managing long-term capital combined with the ability to buy assets at a discount to intrinsic value. The Company is managed by Aberdeen’s Closed End Fund Opportunities Team with the objective of delivering returns in excess of its benchmark (MSCI Emerging Markets Net Total Return Index), which it has achieved since launch in 1998.

A differentiated approach to investing in an attractive asset class

As a significant investor in emerging markets, we are optimistic about the long term prospects for the asset class. At the same time, we acknowledge that emerging markets can be volatile, cyclical and inefficient. Such characteristics play into the hands of active investment managers who, through diligent research and stock picking, can deliver attractive long term returns. Such managers are often based in the markets in which they invest and run their funds in structures that are inaccessible to non-institutional investors. If closed end funds run by such managers can be bought at a discount to their intrinsic value, then the narrowing of that discount over time (either naturally, or through corporate governance initiatives) can further enhance returns. The strategy provides diversified exposure across markets, sectors and individual stocks, providing for lower volatility than when investing through a single manager. We believe the Company provides a one-stop-solution for investors seeking to access the best investment talent in emerging markets.

Investment Philosophy

The core beliefs that drive the way we invest the Company’s portfolio are as follows:

  • Active management can deliver long term outperformance in inefficient markets
  • Owning high quality assets trading at attractive valuations is the best way to invest
  • Closed end funds have structural advantages over other fund structures
  • Discounts on closed end funds present an opportunity
  • Discounts on closed end funds present an opportunity
  • Being contrarian goes hand in hand with buying attractively valued assets

Investment Strategy and Process

We seek to achieve the Company’s objective by investing with talented managers (manager selection) who buy companies they understand well in markets that are themselves attractive (asset allocation). Those managers are identified through constant monitoring of the significant universe of managers operating within emerging markets. The approach is unfettered, meaning that we can invest with any manager, anywhere in the world. We aim to be invested in the most efficient structure at any given point in time, be that open ended or closed ended (discount opportunities). Reflecting this, our investment process includes three key pillars:

The Investment Process results in a high conviction portfolio of the best opportunities that can be identified at any given point in time. Portfolio turnover is generally in the region of 20-30% and it is not uncommon for us to be invested with specific managers for a period of 10 years or more.

Investment Team

The Closed End Fund Opportunities Team is one of the best resourced and most experienced of any operating globally with a similar strategy. The team’s members have in excess of 60 years’ experience of investing in emerging markets. Average tenure on the team is in excess of 10 years. The team operates out of London but its members travel frequently to emerging markets to identify those managers to whom it wishes to allocate the Company’s assets. Being part of a global asset management business, the Team has the ability to draw on the expertise of the larger group.