Aberforth Split Level Income Trust

Last updated 26 November 2018
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A UK focused portfolio with a highly differentiated small cap value bias and a disciplined and experienced management team…

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 Trust

Aberforth Split Level Income Trust (ASLIT) is now in its second year having launched on 3 July 2017. In contrast to the first twelve months, in which the trust outperformed the Numis Smaller Companies index (excl. Investment Companies), the period since the summer has been challenging for the trust. Distinct to big-sister Aberforth Smaller Companies Trust (ASCOT), the trust has an inherent income bias.

Being contrarian and value investors, the portfolio is unsurprisingly heavily exposed to UK domestic stocks. However, the managers highlight that their portfolio currently represents many layers of opportunity, with UK stocks being out of favour (from the perspective of international investors), small caps having underperformed large caps, value having underperformed growth over a number of years, and lastly, the domestic focus of many of the underlying companies.

The Aberforth approach, the income mandate and the company’s structure means that ASLIT is highly differentiated to its peers in both the closed- and open-ended sectors. ASLIT has the most extreme positioning towards value (according to Morningstar). Relative to peers, the ordinary shares of ASLIT have the highest gearing to equities of peers.

The dividend of 4p (ex last year’s special) currently yields 4.9% on a historic basis, is one of the key draws for ASLIT. ASLIT is currently delivering ahead of target on the income front having generated earnings per share of 5.43p for the first full year to 30th June 2018. The board have banked revenue reserves of 0.8p per share. Taking the difference between the company’s cum- and ex-income NAV’s and the dividend so far paid (the company pays two dividends per year) reveals that earnings this year (for the five months to mid-November) have so far been in the order of 2.1p per share. The managers currently expect mid single digit dividend growth from small caps in the current year, which would be a deceleration compared with recent years but which would still represent progress in real terms.

The managers aim to have ASLIT near fully invested at a portfolio level at all times. The company has structural gearing in the form of zero dividend preference shares, which means that the ordinary shares are 28% geared, considerably higher than most smaller company trust peers, most of which do not have any gearing at all.

The Aberforth team has decades of experience between its members, but the original partners have gradually been retiring, being replaced by a committed team of experienced investors. Alistair Whyte and Richard Newbery are the last of the original partners, having been on the team since launch in 1990. Richard has recently announced his intention to retire in April 2019. The newest recruit is Jeremy Hall who has recently joined from Cartesian and Nikko.

When we last reviewed ASLIT the shares were trading on a discount of c.7.5%. Since then, that rating has improved to c 4.5% and the shares continue to trade at a premium to the wider smaller companies peer group, but in line with the higher income trusts such as Chelverton UK Dividend Trust and Acorn Income Trust.

William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

Related Research

Key facts

Investment objective

The Trust’s investment objective is to provide Ordinary Shareholders with a high level of income, together with the potential for income and capital growth, and to provide ZDP Shareholders with a pre-determined final capital entitlement of 127.25p on the planned winding up date of 1 July 2024.


Aberforth Split Level Income



Management Company

Aberforth Partners LLP

Manager Name

Alistair Whyte; Chris Watt; Euan Macdonald; Keith Muir; Peter Shaw; Richard Newbery; Jeremy Hall

Association of Investment Companies (AIC) Sector

UK Smaller Companies

12 Mo Yield


Dividend Distribution Frequency


Latest Market Capitalisation


Latest Net Gearing (Cum Fair)


Latest Ongoing Charge Ex Perf Fee %


Turnover Ratio %


Shares Outstanding


Discount % (Cum Fair)


Daily Closing Price



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