Aberforth Split Level Income

Last updated 10 December 2019

ASIT is a small-cap value trust, with a yield of 5%...

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Aberforth Split Level Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Aberforth Split Level Income

Aberforth Split Level Income Trust (ASIT) invests in UK smaller companies in order to provide a high income to investors, by aiming to identify undervalued companies with attractive dividend yields and use structural gearing to enhance the income they provide. The ordinary shares currently yield 5%.

ASIT is managed by a team of seven at Aberforth Partners, who have been employing a disciplined value strategy in the small-cap space since 1990. The track record of the team illustrates the outperformance potential of such an approach, while they also have experience in managing geared income portfolios like ASIT - find out more about ASIT's performance track record.

The trust has a fixed life and will be wound up in July 2024. It is geared through the issuance at launch of zero dividend preference shares (ZDPs), which pay back a fixed amount at wind-up and receive no dividends, allowing ordinary shareholders to receive a higher yield (see the gearing section for details). It is the successor to Aberforth Geared Income Trust, which was managed with the same approach for seven years to June 2017, and which successfully met its income objectives and generated a total return of 20% per annum to shareholders (up to the time when it was wound up at the end of its fixed life). These high returns were aided by an excellent period for small caps, which might not be repeated.

ASIT was launched into a rough period for a value approach to investing, but the portfolio it owns looks extremely cheap relative to the market, and relative returns since mid-August have been strong. The managers take a highly active approach which offers long-term outperformance potential. Following the strong run in recent months, the discount has narrowed and sits at 8.3%, wider than the average AIC UK Smaller Companies trust - read more on ASIT's discount.

Thomas McMahon
Thomas is a senior investment trust analyst and joined Kepler in April 2018. Previously he was senior analyst at FE Invest, where he was responsible for fund selection for a range of model portfolios. He covered all asset classes over time, but has particular experience with emerging markets and fixed income as well as UK smaller companies funds. He has a degree in Philosophy from Warwick University and is a CFA charterholder.

Fund History

Related Research

Key facts

Investment objective

To provide ordinary shareholders with a high level of income with the potential for income and capital growth, and to provide zero dividend preference (ZDP) shareholders with a pre-determined final capital entitlement of 127.25p per ZDP share on the planned winding-up date of 1 July 2024

As at:

06/12/19

Trust Name

Aberforth Split Level Income

Ticker

ASIT

Management Company

Aberforth Partners LLP

Manager Names

Peter Shaw; Alistair Whyte; Chris Watt; Keith Muir; Euan Macdonald; Jeremy Hall; Sam Ford

Association of Investment Companies (AIC) Sector

UK Smaller Companies

12 Mo Yield

5%

Dividend Distribution Frequency

Semi-Annually

Latest Market Capitalisation

£159,334,375

Latest Net Gearing (Cum Fair)

29%

Latest Ongoing Charge Ex Perf Fee

1.2%

Turnover Ratio

16.9%

Shares Outstanding

190,250,000

(Discount)/ Premium (Cum Fair)

-8.3%

Daily Closing Price

83.75p

Source: Morningstar

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

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