Aberdeen S Indian Equity A Acc USD

Analyst Report
Morningstar's Take
|06/07/2021

by Samuel Lo


AS SICAV I Indian Equity continues to benefit from a solid team of five portfolio managers who manage it collegially using a time-tested quality-focused investment approach. However, owing to changes in the competitive landscape within the India equity Morningstar Category, the Morningstar Analyst Ratings for a number of share classes, including the X Acc USD clean share class, have been downgraded to Bronze from Silver, while the other share classes retained their Silver or Bronze ratings.The investment team consists of James Thom, Adrian Lim, Kristy Fong, Neil Sun, and Yoojeong Oh. We have met Thom, who leads the group, as well as Lim and Oh over the years, and during our meetings they have consistently demonstrated detailed knowledge on portfolio holdings and a strong commitment to the investment philosophy. The five managers average 16 years of investment experience and 14 years of firm tenure, and they are part of the 16-member Singapore desk. The broader team has remained fairly stable and contributes to this strategy as well as other equity strategies in the region. Encouragingly, since the 2017 merger between Aberdeen and Standard Life, the team has strengthened accountability by introducing formal sector coverage responsibilities and by better aligning the managers’ compensation with strategy performance.The team places a strong emphasis on the quality of a business, such as management quality, competitive moats, and financial solidity, and the portfolio has a consistently higher return-on-equity and debt/capital ratio than the MSCI India index. A “focus on change” component was added to the research process in 2018 as a supplement to the long-standing core investment approach. While the team remained steadfast to its long-term, quality-focused knitting, the adjustment has helped the team make timelier decisions by being more aware of shorter-term developments.The strategy has a strong long-term track record, although more recent results have been lacklustre. For the three years ended 31 May 2021, the X Acc USD share class returned 8.26% per year, lagging the MSCI India index by 351 basis points and ranking in the 63rd percentile among peers. Along with a few stock-selection setbacks, the portfolio’s omission of the high-flying index giant Reliance Industries, which the team avoided for quality reasons, has significantly weighed on relative performance.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleGiven the potential volatility associated with a single-country emerging-markets strategy, this is best used as a satellite allocation in a diversified portfolio.
Morningstar Pillars
PeopleAbove Average
The strategy is managed by a collegial team of five capable investors.
ParentAverage
A new CEO and merger distractions are largely a thing of the past
ProcessAbove Average
A time-tested, bottom-up approach with a focus on quality.
Performance
Solid long-term track record, although recent results have been lackluster.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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In order to provide consistency across the report data provided by different Asset Managers, the calculated data points presented are generated using Morningstar’s proprietary calculation methodology which is set out in more detail at(https://www.morningstar.com/research/signature)
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