Abrdn Diversified Income... Share Discussion Threads

[tiltonboy] 20/8/2021 12:02

EI,

British Assets, then Black Rock Income Strategies. It should have been wound-up years ago...and still should be!

[spectoacc] 20/8/2021 11:30

He sounds more level-headed than I expected (still listening).

6% pa and capital growth, with low equity correlation. Yet interest rates are 0.1%. Not convinced. Emerging market bonds, CLOs - great, when going well, but can go very wrong. Not convinced there's a rolling 5yr 6% annualised that also has very low risk. Sure, you'd hope for nearer 8% from equities longer term, but you'd have to accept 50% downside too.

ADIG seems to be punted at the riskier end, both in liquidity and asset class, whilst claiming to produce a low-risk 6% pa by virtue of being diversified across these assets, LTCM-style.

Social housing, PE, CLO, bonds, healthcare royalties, EM bonds - can buy ITs in all of those. Just waiting for him to mention music streaming :)

Does the discount account for the hidden risk...

[essentialinvestor] 20/8/2021 11:29

Discount to NAV is at least partly because of repeated failures to hit the Trust
mandate under various incarnations/guises. Formally British Assets Trust (from memory)
then a mandate and name change which completely failed - the name escapes
me now. Next it became ADIG and failed again to perform leading
to an investment review, another new lead Manager from the same stable ...

I take the point about the rest of the market being priced for perfection etc.

[hindsight] 20/8/2021 11:17

[@hindsight - I'm getting larger into the REITs! Still more to go IMO, now the NAVs are rising and divis being (slowly) reinstated.]

Hope your right, some M&A is needed on a lot, too many over feed turkeys

[speedsgh] 20/8/2021 11:13

@Specto - Here is the link to the playback of the QuotedData presentation by ADIG's Nalaka de Silva from May this year. Possibly useful as part of your reseearch...

[spectoacc] 20/8/2021 11:02

Thanks both. Agree on discount point, and yield. Perhaps buybacks narrow the discount (but I think it deserves it). I challenge any holder to read this snippet and think it should be trading at par:


"At end-November 2020, the second largest exposure was the TwentyFour Asset Backed
Opportunities Fund (c 8.6% of NAV). It has a substantial exposure to residential mortgage-backed
securities (c 51% at end-July 2020) as well as collateralised loan obligations (30%), while the
remaining portfolio included auto loans (6%), consumer asset backed securities (6%), commercial
mortgage-backed securities (4%) and cash and equivalents (2%). At end-July 2020, 25% of its
portfolio was rated at A and higher, 9% at BBB, 35% at BB, 23% at B, 2% at CCC, while 7% was
not rated. ADIG’s manager thinks that the default rate on medium-risk securities is currently low as
many of the underlying borrowers are in areas supported by government and central banks’
schemes. The fund has outperformed UK equities by over 15% since its launch in early 2017 to
July 2020, exhibiting much lower volatility than equity investments, according to the manager. While
its six-month performance to end-March 2020 was negative 15%...."


Wonder how many ADIG holders know about CLO exposure, albeit not large overall.

[@hindsight - I'm getting larger into the REITs! Still more to go IMO, now the NAVs are rising and divis being (slowly) reinstated.]

@CC2014 - unconvinced the money isn't still being sprayed around. Struggling to see where the outperformance comes from.


Tried the website link "Diversification 4.0: the past, present, and future of diversification":



"Company Proflies" has only this one:


Which again, talks a good game, but again, find myself either questioning the quantum of the returns, or thinking "why would you invest in anything else?". And again, returns well above what ADIG are targeting:

"The fund has a target return of 8-10% p.a. net of fees, half of which is expected to be generated from income. The Company committed €28.5m to SLCI II in 2018, the majority of which has been drawn and invested in a portfolio of solar farms in Poland; a UK rail rolling stock investment; two district heating investments in Finland and an energy storage business operating in both Germany and Belgium."


Wonder where that 2018 investment sits in NAV terms now?


I like the game they talk. I'm not convinced they're also walking the walk, nor that multi-asset, multi-manager, almost absolute-return funds work.

Paid-for Edison note just repeats management per usual, but interesting seeing the table of changes since 2019, & therefore where the fund's heading in terms of allocation.

[cc2014] 20/8/2021 10:44

SpectoAcc. Welcome to the Board. I'm sure we will all be interested to see your outlook when you have got to the end of your research.

For my part the decision process is pretty simple. Does the super large discount outweigh the checkered past of the IT, the morningstar rating of 1 and everything else there is not to like.

I concluded long ago that this is absolutely the sort of Trust I hate, a sort of fund of funds spraying money around anywhere they can find some yield to fit the target return. Or at least that's what the previous fund manager did who got ADIG into a right mess. I'm far more comfortable with the new manager although he is yet to deilver what he promises but no concerns of yet. There's a helpful video by him which if you scroll back there will be a link. Well worth a watch.


It is my view that as the market becomes more comfortable with the new fund manager the discount will close to around 10% and the closing of the discount outweights my concerns over some of the investments. I am however now wondering if the amount of P/E makes ADIG more opaque and this in itself may constrain the closing of the discount.

The yield is apparently nearly covered this year but will be going forward which is a better position than many of the IT's paying this sort of yield. Also, some of the funds ADIG is invested in are trading at a discount too so that's a discount on top of a discount (or at least they were when I bought, I haven't checked recently)

ADIG is about 1.5% of my portfolio and I own none of things it's invested in and it holds a bunch of stuff which spreads my risk compared with my other investments

[hindsight] 20/8/2021 10:29

All about the discount for me, there are very few free lunches in the income field, the grass was eaten down a long time ago. Any any good arbs that appear will be in closed funds and any tail risk will be open funds. Why last 12 months have been buying in reits, etc. But the grass in that field is looking well eaten too now.

[spectoacc] 20/8/2021 10:01

Guess the test will be how it performs in a bear market. Is it just a fund-of-funds of mostly the same thing, or is there genuine diversification. If there isn't, why hold so many.

Do quite like the Aberdeen Global Private Markets Fund write-up, albeit it's a holy grail I bet they'll struggle to achieve, particularly now. And unsure why you'd buy anything else - ie why you'd dilute what this fund is offering:



"Return potential
In the current environment, fully-priced equity markets and
ultra-low bond yields mean that returns from traditional balanced
investment portfolios are likely to be very modest in future. At the
same time, diversification is harder to find – the world economy is
more closely connected than ever, with financial markets
inextricably linked.

But in a private market universe – spanning private equity,
private credit, real estate, infrastructure and natural resources –
an asset class can be less sensitive to economic forces and,
therefore, less cyclical. Many of the assets underlying private
market investments generate cash flows that are driven by
reliable, long-term contracts. Examples include renewable
energy-generating farms, schools and hospitals.

For decades, most investors have relied exclusively on assets listed
on public markets. Yet, higher returns are often available from
unlisted or privately held assets like private equity, private
infrastructure, real estate and private credit. Private assets
typically offer higher returns than their listed counterparts
because investors are rewarded by an illiquidity premium.
Strong demand for private markets in recent years indicates this
premium is still appealing, given the low returns expected from
listed assets. Furthermore, many private assets offer a substantial
income return.

Diversification
Moreover, as well as attractive return potential, GPMF also offers
diversification benefits, either on its own or as part of a wider
portfolio. This is because returns from the underlying assets have
a low correlation with both listed markets, and with each other.
This lowers overall portfolio risk. It means we can aim to construct
a lower-risk portfolio with a higher expected return than public
market equivalents.

In an environment of very low government-bond yields and
sluggish global growth, we believe the Fund is well-positioned to
deliver better return prospects than traditional balanced portfolios
while, at the same time, preserving defensive characteristics."

[greenpastures2] 20/8/2021 09:50

I do look upon it as giving me some exposure in stocks and funds that I would not otherwise access. I haven't gone overboard with about 2% of my portfolio and regard it as a useful little earner.

[spectoacc] 20/8/2021 09:33

Thanks @hindsight. Agreed, and would hope ADIG gets lower fee level than could get direct, particularly on the Aberdeen funds.

[Edit - headline fee on the largest Aberdeen fund is: "Management fee: 85bps, OCF: 145bps". That for a fund holding 10% in cash].

There's fees beyond the 0.6% pa coming out of ADIG - tho probably not all that high, since trading should be minimal.

Still - fact remains it's only a buy thanks to the discount, and the hope of that getting to 5% or even to par seem optimistic. There's surely little clever in bundling together multi-asset funds into an IT, other than to hide the possible riskiness of the bond & CLO holdings.

[hindsight] 20/8/2021 09:28

SpectoAcc could argue the discount covers the fees ie using your 7%-0.6% = 6.4% and 20% discount get 8.0%
Edited

[spectoacc] 20/8/2021 09:05

Answering own q's via Google:


TwentyFour Asset Backed Opps Fund
"The Fund aims to provide an attractive level of income along with an opportunity for capital growth. The Fund aims to target a net total return of GBP 3 month Libor* + 5% – 8% per year. ... The Fund will choose bonds based on their risk and the attractiveness of their income."

So presumably corporate/higher risk bonds, and targetting a return above that of ADIG's.


Aberdeen Standard Global Private Markets Fund:


Not at all sure about this one:

"A ‘one-stop’ solution offering
exposure to global private
markets for investors
with liquidity and
regulatory constraints "

So why would you want to hold anything else? And 15% in CLO's or equivalent. Worth looking at the spread of what this fund is in.


Neuberger Berman CLO Income Fund

"The Portfolio aims to achieve an attractive level of total return (a combination of capital appreciation and income) by investing primarily in USD and EUR denominated floating rate collateralised loan obligations (“CLO”) mezzanine debt securities and also in US high yield debt securities"

As expected. Again, look at the yield on FAIR, or the slightly different TORO.


Concluding there's a lot more risk in ADIG than is first apparent. Predominantly a selection of funds that generally aim for a higher headline return than ADIG's, presumably to account for the 0.6% & listing fees. And what you're ultimately in may not be what you think you're in, and the diversification of holding many different funds may not work if they're all diversified in the same things.

Or put another way - I could set up an IT that promises 6% pa, then invest it in a bunch of other funds that promise 7% pa. The only reason to punt the IT would be the discount. Otherwise, just punt the funds themselves. In the meantime, I'm getting a tidy income from deciding which funds to go into.

[spectoacc] 20/8/2021 08:50

New to "new" ADIG, trying to get head around what it actually holds now.

From Factsheet:

TwentyFour Asset Backed Opps Fund - what's that actually in?
Aberdeen Standard Global Private Markets Fund - ditto
Neuberger Berman CLO Income Fund - is that what I think it is, CLO's?

Various other funds below that. So double-dipping on the fees? They're low at Trust level (0.6%) but paying at the investee co level.

And how often do the PE-style ones revalue - presumably qtly, for previous qtr, so a dip like we've had this week doesn't show up for ages.

Does the yield come all from income, or is some of it capital? Other than the smattering of renewable ITs, not seeing steady divi payers.

Attracted by discount & yield, but put off by opaqness of holdings, double charges, and what to me seems a low target for the risk taken (rolling c.6% pa when eg CLO funds yielding 10%+)

[hohum1] 30/7/2021 06:11

At last the buyback has kicked in again. Not before time..

[hugepants] 26/7/2021 14:41

It looked for a while that the discount was beginning to close here but its back up to 17% with NAV at 119.3p. The NAV is now pretty much where it was pre-pandemic but the share price is more than 10% lower. Feels really low risk with that discount, diversification, negligible gearing and above average yield. De Silva looks to be doing a bit better than the previous shower that were running this trust but not reflected in the share price!

[cc2014] 10/6/2021 12:05

Roll of drums. 100 on the bid and holding.

[hugepants] 10/6/2021 10:11

9 June 2021

Second Interim Dividend for the year ended 30 September 2021

The Board of Aberdeen Diversified Income and Growth Trust plc (the "Company") announces that it is declaring a second interim dividend in respect of the year to 30 September 2021 of 1.38 pence per share on the Ordinary shares of the Company in relation to the quarter ended 31 March 2021.

The second interim dividend will be paid on 15 July 2021 to shareholders on the register on 18 June 2021. The ex-dividend date is 17 June 2021.

[greenpastures2] 04/6/2021 16:28

I added a few more this afternoon. It is invested in things in which I would never have any exposure otherwise.

[hugepants] 04/6/2021 16:07

"The discount is too large..."

Agreed and I don't understand why it's still at 17%. It was 5%-6% pre-pandemic so there is an easy 10% upside here even if NAV treads water. In the meantime collect the 5.7% yield!

[essentialinvestor] 04/6/2021 13:51

There is also opportunity cost, what else were you looking at and how has
that performed over the same timeframe etc.

My cat Gump, not known for his intellect, could make returns in current market conditions.

[cc2014] 04/6/2021 12:23

Share price finally creeping up consistently. Funny how I'm now looking at it and thinking I should have bought more whilst at the time I didn't want to overcommit.

Indeed I'm still looking and thinking I should buy more but I shall resist. The discount is too large but I'm not convinced De Silva can consistently turn 6% although I will be satisfied with say 5.5%. Not sure he can do that either but as long as it doesn't go below 5% it won't concern me.

[essentialinvestor] 01/6/2021 11:37

The % discount is more than warranted imv.

If they can fulfill their performance mandate then things may begin to
look a little different.


How many does De Silva hold...


I'm a believer in watch what they do, not what they say.

[wunderbar] 28/5/2021 18:56

Thanks to everyone who responded to my question re ADIG management fees.

Having watched Nalaka De Silva’s presentation I've noted some key points. Performance measure: NAV total return (defined as change in NAV plus dividends reinvested) of 6% per annum over a rolling five year period. The growth element will come from Private and Alternative markets. The goal is to reposition the fund as follows: Private Markets 45%, Listed Alternatives 20%, Fixed Income & Credit 25%, Equities 10%.

Following info taken from the Earnings slide: How does the portfolio translate to Earnings? As the portfolio transitions the predictability of earnings will become clearer as we gain more exposure to contracted cash flows from Infrastructure Assets and Credit Investments (>65% of Earnings Per Share). Additional earnings will be sourced from alternative income sources such as Emerging Market Debt, Specialised Finance and Royalties. We believe these reliable income streams will support ADIG’s ability to continue to pay sustainable dividends.

A question was posed to De Silva asking if there was any kind of discount target (re NAV), he said the boards objective would be to get within 5% (currently c.18%). De Silva himself said he hopes to see ADIG “trading at close to par in a couple years time". He went on to say, “I’m pretty happy to be a fairly boring dividend play for a short period of time while we grow and provide some stability for investors”. END.

As I’ve said before I’m very happy for ADIG to keep plodding on, steady as she goes, boring dividend play indeed. Who can complain with the stock generating almost 6% yield at current price. Talking of which we’ve seen a steady rise of a few pence over the last week or so, almost touching 98p now (noting 6 month trading range 92p-100p). Given the large discount to NAV (117p) I’d expect the gap to reduce considerably within 6-12 months, perhaps even touching 105p-110p.

However, should De Silva’s reboot strategy fail to have any meaningful impact on NAV or share price in the next 12-18 months then both he and the board of directors will have some explaining to do, especially as the previous Aberdeen manager oversaw a c.20% decline in share price over a 5 year period, truly diabolical. Of course it’s still early days noting the change of investment strategy only became effective from AGM date of 23 February 2021. Whilst I’ve always viewed ADIG an income stock, by virtue of having the word ‘growth’ in its title it’s about time this stock actually did what it says on the tin… GROWS!

[hugepants] 25/5/2021 16:25

NAV still trending north here at 117.2p. Yield 5.75%. Discount still 18%-19% though but it will close at some point.