Aberdeen knows its way around Asian small co's

Although well known, the arguments for investing in Asian equities remain compelling. India now boasts an emerging middle class; China is the engine for global recovery; while more mature economies, such as Singapore and Korea offer, well-established companies with large exposure to the budding markets of Indonesia, Vietnam and Thailand. The problem is knowing which companies to invest in. Private investors here in Blighty are stuck with little of the information that Asia specialists get day-to-day. Due to this, we reckon the way to play the region is to buy an investment trust with a successful fund manager, good performance and a proven investment process. The Aberdeen Asian Smaller Companies investment trust offers exactly that.

The fund only invests in companies with a market value of under $750m (£500m), which gives exposure to the drivers of growth across the region; while a bias towards domestic stocks aims to benefit from the emergence of consumers in Asia. What's more, the team's bottom-up investment process puts caution high on the agenda. Companies must have tried-and-tested records, robust profits potential and, most importantly, adhere to good corporate governance and respect minority shareholders. This means the trust has no direct investments in Chinese companies, as many of China's small caps are dominated by autocratic entrepreneurs. But the trust does benefit from China's growth through well-established companies listed in Hong Kong.

Management's prudent approach also sees the fund buy into global brands that have small cap listings in Asian markets. Holdings include GoodYear in Thailand, Heineken in Indonesia and British Gas in India. This combination of caution and small cap growth should provide comfort for private investors in the UK. "In rising markets, they are not going to shoot the lights out," says Stephen Peters, an analyst at broker Charles Stanley, "But in falling markets, they will certainly do well."

Such confidence is predominantly due to the manager's long-standing track record in the region. Hugh Young founded Aberdeen's Singapore office in 1992, and is seen as a master stock-picker in Asia. Unfortunately, Mr Young's day-to-day influence in the fund is watered down now, because he is managing director of Aberdeen Asset Management Asia.

Luckily, what is lost in direct control is compensated by the diversity of Aberdeen's Asian team, which consists of two senior investment managers and an investment director. This is supported by 65 investment analysts in Bangkok, Hong Kong, Kuala Lumpur and Sydney. The smaller companies team made approximately 800 visits last year to over 300 companies, rotating staff to ensure objectivity. Sticking to one of Mr Young’s golden rules is now easier than ever: "Only buy shares in companies you’ve visited."