The Directors of Aberdeen Diversified Income and Growth (“The Company”), the £397m investment trust that seeks to provide income and capital appreciation over the long term through investment in a globally diversified multi-asset portfolio, today announces the Company’s half yearly results for the six-months ended 31st March 2022. The results can be found here: Half Yearly Financial Report – 15 Jun 2022 – ADIG News article | London Stock Exchange.
Financial highlights over this reporting period include:
- Net Asset Value (NAV) total return: +3.8%
- Share Price total return: +4.4%
- Dividend yield: 5.5%
Performance over the reporting period: “A dramatic period, both in terms of politics & economics, and market performance.”
Manager of Aberdeen Diversified Income and Growth Trust, Nalaka De Silva said: “The last six months have been one of the most volatile and dramatic periods in equities and bond markets that we can remember.
“The saying ‘may you live in interesting times’ could not be more appropriate – we have had dramatic inflation increases in the West and we are now experiencing war in Europe – something that was almost unthinkable when we last wrote. Our thoughts are with those who have connections with Ukraine.
“On an absolute and relative basis return on net asset value, with debt at fair value and including income, has been reasonable during the period. The Company delivered a total return of 3.8% with 2.6% volatility, a good risk adjusted return per unit of risk taken.
“The compared with a 4.7% return in equities as measured by the FTSE All-Share Index with 11.8% volatility, and -5.2% in government bonds as measured by the ICE BofA UK Gilt Index with a volatility of 14.8%. The share price total return was 4.4% during the period.”
Aberdeen Diversified Income and Growth: protecting capital in a challenging environment
The Company protected capital over the reporting period, in what was a very challenging market environment, with Private Market investments driving returns with Equities also performing well.
In Private Markets, the standout performers were infrastructure and private equity: Aberdeen Global Infrastructure Partners II was marked up significantly on a better than initially forecast outlook for the I77 Express Lane asset’s revenue. SL Capital Infrastructure II benefitted as revenues increased due to inflation linkage across the portfolio and increased power prices for its solar investment in Poland. Andean Social Infrastructure Fund I also enjoyed positive performance due to the inflation linkage of its revenues.
Within Private Equity, Maj Equity Fund IV sold Svendsen Sports, a Scandinavian fishing tackle specialist retailer, for a higher than forecast price. The Aberdeen Standard Secondary Opportunities Fund IV benefited from strong performance from the investments acquired off-market via the abrdn origination network, driven by Vitriuvian II, a European high growth, tech enabled private equity fund.
Further information can be found in the announcement made today: Half Yearly Financial Report – 15 Jun 2022 – ADIG News article | London Stock Exchange
The Company’s revenue return for the six months ended 31 March 2022 was 2.79 pence per share (2021 – 2.79 pence). For the year to 30 September 2022, a first interim dividend of 1.40 pence (2021 – 1.38 pence) per share was paid to shareholders on 31 March 2022. The Board declared on 8 June 2022 a second interim dividend per share of 1.40 pence (2021 – 1.38 pence) to be paid on 14 July 2022 to shareholders on the register on 17 June 2022 with an ex-dividend date of 15 June 2022. On an annualised basis, a quarterly dividend of 1.40 pence per share is equivalent to a dividend yield of 5.5% based on the period end share price of 101.5 pence.
Davina Walter, Chairman of Aberdeen Diversified Income and Growth Trust, said: “Whilst uncertainty prevails over markets, especially in terms of the inflationary outlook, economic growth and the Russia/Ukraine conflict, the Board believes the Company’s strategy, which seeks to provide capital growth and a dependable quarterly dividend from a diversified portfolio, is well positioned to deliver an attractive total return with lower volatility to its shareholders over the medium term.
“There have certainly been early fears expressed of recession. Whilst such uncertainty exists, we remain mindful of the challenges ahead and your Board together with the Manager continue to review asset allocation on a regular basis with this heightened risk prompting the Manager to reduce equities and emerging market debt exposure as a result.
“The portfolio incorporates a degree of inflation-linkage through its infrastructure assets while the renewable investments offer a degree of income protection. The diversification in the portfolio, provided through investment in a broad range of asset classes, both listed and unlisted, should offer some confidence that the Company is well-placed and will continue to take advantage of investment opportunities that arise from the volatility we are seeing in the markets.”
Manager of Aberdeen Diversified Income and Growth Trust, Nalaka De Silva added: “Omicron continues to weigh on supply chains, exacerbated further by China’s zero Covid strategy. At the same time the war in Ukraine compounds these issues and we expect continued disruption as a result. The combination of conflict and monetary tightening will slow growth below trend.
“The probability of a recession in the US during the next 24 months is undoubtedly increasing. As this risk is elevated we have trimmed our equities and emerging market debt exposure. We have also added US dollar exposure as we suspect this will continue to do well in the current environment of tightening policy in the US.
“We expect credit to be more resilient than it would ordinarily be in this environment as a result of the balance sheet clean up during the depths of the Covid-19 crisis, and whilst we do not expect the recession to be shallow, neither will it be deep or protracted.
“There will be continued inflation upside risk due to supply chain issues and elevated commodities prices. Underlying inflation pressures are mounting, but we think the Company is insulated to a degree as we have inflation sensitive assets such as infrastructure and floating rate credit.
“Policy makers will struggle to look through the energy price shock and underlying inflation pressures will mean tighter financial conditions. We are watching real interest rates (rates after adjusting for inflation) closely.
“In terms of the terrible events occurring in Ukraine, history suggests markets can rebound sharply when geopolitical shocks resolve, but the conflict continues to become more entrenched, sadly.
“The Company has a well-diversified portfolio, and has proven to be resilient in the recent challenging environment. While we expect market conditions to remain challenging, we believe the Company is well placed to continue to navigate what is proving to be a difficult environment. We hope to be able to continue to deliver differentiated returns to shareholders by holding Private Market assets that are uncorrelated, or less correlated to economic events, as well as listed assets that can provide good cash flows, whilst also maintaining exposure to certain assets that can participate to the upside in more constructive market environments.”