Aberdeen Asia Focus plc
Why is this fund on our radar?
Following decades of impressive growth, Asia has been described as an economic miracle. It now makes up over half of global economic output and has considerably increased the wealth of the countries and citizens within it. Arguably, one of the best ways of capturing this growth has been through the region’s smaller companies, which are most exposed to the increase in domestic spending that the economic developments have driven.
Aberdeen Asia Focus (AAS) is one of the longest standing funds focused on this area, and has a resilient process designed to identify the best stocks, led by manager Gabriel Sacks. By capturing the performance of the asset class, the fund has scored highly on our quantitative model, and especially well when considering the performance adjusted for the level of risk the manager has taken.
Skip to Our VerdictPerformance
Smaller companies tend to perform better than larger cap equivalents over the long term. This performance differential can be particularly pronounced in Asia as smaller companies are much more domestically focused, as opposed to larger companies which are more exposed to global forces due to their tendency to be more export orientated.
Smaller companies however, are more exposed to internal factors such as the populations’ increasing wealth. As many countries in the region develop, an emerging middle class have developed, which is giving rise to spending on consumer products, healthcare and financial services such as banking and insurance. Due to the size of the region, the number of smaller companies is very high, with a lot of variances across different geographies. As a result, selecting the best of these opportunities, and avoiding those that are structurally challenged will be key to relative performance.
AAS has been a good example of how to do this. Manager Gabriel Sacks is supported by the large and well-established analyst team at Aberdeen which has enabled him to successfully filter through the large opportunity set and select stocks that others may overlook. Each country will have different factors that contribute to performance, therefore being able to differentiate between them has been critical to success. Stock selection has historically been a big contributor to the strong outperformance of its comparators.
As we discuss in more detail later, Gabriel has a quality focus when looking for potential holdings, looking for those that are leaders in the markets, and with solid financial positions. This means the portfolio will do best when the market is focused on company specific factors, although this could lead to struggles when the market is being driven by investor enthusiasm or hype, without much basis in underlying company performance.
These factors can be seen in the performance chart below. The fund delivered strong performance in 2021, when the domestic Asian economy performed well after successfully recovering from the COVID pandemic quicker than other regions. Performance in the past few years has been very strong too, with three years (including 2025 to 30/11/2025) of double-digit returns, aided by strong stock selection, although 2025 is slightly behind the wider emerging market ETF because of a strong rally in China, heavily affected by investor sentiment. Furthermore, the weakness in 2022 is an example of where the flexibility can cause headwinds. In this period, the managers had a notable allocation to Vietnam which went through a weak period and contributed to the fund falling behind its peer group.
discrete performance
Past performance is not a reliable indicator of future results
Portfolio
Gabriel’s approach is centred around identifying the region’s highest quality companies. He determines this as those operating in growing industries, such as technology, with a competitive advantage over their peers such as IP and with a sensible financial position and not overly indebted. He has considerable flexibility to invest across the region rather than be prescribed by certain sectors or countries because they are large portions of the market, including an ability to invest in areas that aren’t part of his index, such as frontier markets like Sri Lanka, which are typically smaller and less developed than emerging markets, or stocks listed in developed markets but with considerable exposure to the region. However, these positions are carefully monitored though and have been reduced in the past few years due to potential difficulties in selling them.
As such, the portfolio will be an output of where the manager is finding the best ideas, meaning allocations specific industries can vary as the opportunity set evolves. Garbriel focuses on the bottom 20% of the market by company size, ensuring the portfolio is a true small-cap fund, although holdings won’t necessarily be sold should they grow beyond this level. As such, the portfolio will look very different to a passive investment, as well as other Asian-focused funds, even the direct peer group.
Country allocation
Our Verdict
We believe that Asian smaller companies offer exciting growth potential, whilst remaining highly differentiated to other regions. The driver of this growth is linked to the region’s domestic growth story which is unlikely to be affected by global macroeconomic issues, for example tariffs that larger companies have struggled with. This not only differentiates the growth potential, whilst also providing potential benefits such as lower correlation to a wider portfolio.
AAS is particularly well-positioned to capture this, in our view, as a result of the manager’s stock picking skill, aided by the extensive resources at his disposal at Aberdeen. The scale of the region means active management is arguably the best approach, as a professional manager is better placed to sift through the vast number of opportunities and identify the best ones. Furthermore, the investment trust structure, which has a fixed pool of capital, is arguably best suited as it helps avoid the issues of flows that can be present in other vehicles.
Key Risks
- Asian smaller companies can be more volatile than other asset classes
- Sentiment tends to be affected by geopolitical issues, despite the strong domestic influence
- Manager uses gearing which can exacerbate upside as well as downside
