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44. Uncovering Trusts – Invesco Asia Dragon Trust (IAD): A bigger, more efficient version of an already proven formula
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In this episode, our director of content, investment trusts Milosz Papst talks about Invesco Asia Dragon Trust, which was recently created following the merger of Invesco Asia Trust with Asia Dragon Trust. He outlines the key benefits to shareholders of the enlarged entity, which retained the successful investment strategy of Invesco Asia Trust. He discusses the trust’s bottom-up, valuation-aware investment approach focused on sustainable business models and attractive valuations. He explains the deep research capability of Invesco’s Asia and emerging markets team. He also outlines the shareholder-friendly measures introduced in conjunction with the merger, including quarterly dividend payments and an unconditional tender every three years. He concludes by summarising the market view of IAD’s managers.
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About ‘Uncovering Trusts’
'Uncovering Trusts': is a podcast run by Edison analysts released every two weeks. Subscribe to hear analyst interviews on how investment trusts maximise returns while managing risks for investors.
About Edison:
Edison is a content-led IR business. We believe quality investment content should inform all investors, not just brokers. Our mission: engage and build bigger, better-informed investor audiences for our clients.
Edison covers 50+ investment trusts, read about them here: https://www.edisongroup.com/equities/investment-companies/
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Transcript
Introduction to Uncovering Trusts Podcast
00:00:04
Speaker
Welcome to Uncovering Trusts, the Edison Group podcast where we explore some of the most interesting investment trusts on the market. I'm your host, Will Manuel, and today we're heading to Asia, region that remains central to global growth and innovation.
Discussion on Invesco Asia Dragon Trust
00:00:18
Speaker
Joining me is Milos Patz, Director of Investment Companies content at Edison. Milos, great have you back. Thanks, Will. Always a pleasure. And particularly so today, as we are discussing the newly enlarged Invesco Asia Dragon Trust, or IAD.
00:00:33
Speaker
This is the successor to Invesco Asia Trust, which earlier this year merged with Asia Dragon Trust that has transformed its scale and profile. Okay, so let's start there then. um The merger attracted a lot lot of attention in the investment trust world.
00:00:47
Speaker
Can you tell us what it involved and why it matters?
Benefits of the Trust Merger
00:00:51
Speaker
Absolutely. um In February this year, Invesco Asia Trust completed the absorption of Asia Dragon Trust. The transaction combined the two vehicles under the Invesco umbrella with Invesco Asia Trust's bottom-up valuation-aware investment strategy carried forward and changed under the new name Invesco Asia Dragon Trust.
00:01:09
Speaker
The merger created a much larger fund, now managing around £900 million pounds of assets, which has strengthened liquidity, reduced costs and expanded the investor base. Importantly, because Asia Dragon Trust had previously been a member of a major UK equity index, the combined entity retained that index inclusion, immediately elevating the trust's visibility among a wider range of investors.
00:01:33
Speaker
At the same time, the ongoing charges ratio has dropped to about 0.8%, down from over 1% previously, so investors are getting a more efficient efficient vehicle without any change to its proven investment approach or
Market Reaction and Return
00:01:46
Speaker
management team. Right, that's a significant shift since it's bigger, cheaper to run, and now included in a major index.
00:01:53
Speaker
How has the market reacted so far? Yeah, so the reaction's been very positive. Over the last 12 months, the trust shares delivered a total return of over 30%, which reflected both the above benchmark performance of the portfolio, as well as narrowing of the discount to NAV, which, in my view, reflects improved investor confidence in the enlarged entity.
00:02:14
Speaker
This performance, coupled with great liquidity and index inclusion, has helped reposition Invesco Asia Dragon Trust as a core option for Asia equity exposure with the same discipline style, but far broader appeal.
00:02:26
Speaker
Right. So you mentioned that the strategy remains unchanged.
Investment Strategy and Philosophy
00:02:30
Speaker
For listeners less familiar with Invesco Asia Trust's approach, what defines this investment style?
00:02:37
Speaker
and So the managers, Fiona Yang and Ian Hargreaves, follow a contrarian valuation-aware philosophy. They look for strong, well-managed companies that are temporarily out of favor, and so they are willing to wait for sentiment to converge with fundamentals.
00:02:53
Speaker
It's a patient bottom-up process focusing on sustainable business models and attractive valuations rather than you know chasing market trends. The manager's long-term record shows that this approach can both protect capital in downturns and outperform the recoveries.
00:03:08
Speaker
ah The portfolio typically holds around 50 to 60 stocks with a bias towards large liquid names. um The current top positions include TSMC, Tencent, Samsung, and AIA.
00:03:20
Speaker
ah The fund does not structurally favour any region or nor industry. It sounds like a carefully balanced approach, selective but regionally diversified. How does the team manage risk across such a wide
Enhancements Post-Merger
00:03:32
Speaker
universe? One of the key advantages here is Invesco's deep research capability.
00:03:37
Speaker
The Asia and emerging markets team meets hundreds of companies each year, combining on-the-ground insight with disciplined financial analysis. Additionally, the managers keep gearing modest, currently around 1% of net assets, and focus on balance sheet strength to help cash in against market shocks.
00:03:54
Speaker
Right, and what what about the measures in place to enhance the value proposition of the trust to shareholders? That's another area where the post-merger structure has brought real improvements. Following the merger, the trust introduced several enhancements designed to make it more attractive and shareholder-friendly.
00:04:11
Speaker
The trust now offers an unconditional tender every three years, ah giving investors the the option to redeem all or part of their holdings at a 4% discount to NAV, a more flexible arrangement than before.
00:04:23
Speaker
In addition, dividend frequency was increased to quarterly payments, which provides investors with a smoother income stream. ah Together, these changes have strengthened the trust aligned with shareholders while improving liquidity and overall market appeal.
00:04:37
Speaker
ah The board also conducts regular share buybacks whenever the discount widens beyond its target level, aiming to keep it below 10% under normal conditions. um The current discount is around 7.5%.
00:04:49
Speaker
Okay, that's interesting. And Asia certainly offers plenty of scope for contrarian opportunities. um Where are they seeing the best value right now?
Focus on China and Key Markets
00:04:58
Speaker
The managers remain cautiously optimistic.
00:05:01
Speaker
They know that Asia continues to offer solid double-digit corporate earnings growth, while valuations across much of the region are still reasonable compared with developed markets.
00:05:11
Speaker
um The team continues to see opportunity in China, which remains the trust overweight and a key driver of returns this year. Chinese equities rebounded as stimulus measures began to feed through and trust holdings such as net ease were standout performance.
00:05:26
Speaker
The managers believe that many high quality Chinese cons consumer and technology companies still trade on depressed valuations ah despite evidence of improved demand. ah China's GDP growth of around 5% in the first half of 2025 and improving retail sales have supported the view that the worst of the slowdown may be behind us.
00:05:47
Speaker
Chinese equities ah benefited from renewed investor confidence and stronger sentiment following the launch of and homegrown AI initiatives such as DeepSeek.
Growth Potential in South Korea and ASEAN
00:05:57
Speaker
Elsewhere, South Korea remains a conviction area.
00:06:02
Speaker
The government's value-up reforms aimed at improving corporate governance are seen as a potential re-rating catalyst. The managers believe that these changes could help close the long-standing so-called Korean discounts by encouraging better shareholder returns.
00:06:19
Speaker
Co-holdings such as Samsung Fire and Marine and KB Financial are already seeing positive effects. um The team also remains constructive on ASEAN markets, um especially Indonesia and Thailand, which offer attractive valuations and supportive long-term growth fundamentals.
00:06:37
Speaker
Overall, the portfolio favors strong balance sheets and companies capable of delivering healthy total shareholder returns through both dividends and buybacks, while keeping an eye on external risks like shifting global tariff policies. so On the other hand, managers remain cautious on India and Taiwan, where valuations look more demanding after strong rallies.
Cautious Approach in India and Taiwan
00:06:58
Speaker
ah This is not to say that they do not see opportunities on these markets. After all, Taiwanese semiconductor companies represent a significant part of the portfolio. Having said that, the Trust's underweight exposure to India benefited their relative performance in the last quarter as the market continued to underperform due to still expensive valuations, softer earnings and renewed trade tensions.
00:07:21
Speaker
Okay, so um
Conclusion and Future Outlook
00:07:23
Speaker
thank you. Before we finish, how would you sum up where the Investical Asia Dragon Trust stands now post-merger? I would describe it as a bigger, more efficient version of an already proven formula.
00:07:35
Speaker
The Trust has kept the same disciplined investment process that delivered strong long-term outperformance, but with the additional benefits of scale, lower costs, and higher visibility. It offers investors diversified exposure to Asian equities, a competitive 4% yield, and a team with the experience to take advantage of valuation anomalies across the region.
00:07:55
Speaker
In short, it's an evolution rather than a reinvention and one that set the trust up very well for the years ahead. Okay, that's a great summary, Milos. Thank you for joining us and taking us through the story of Invesco Asian Dragon and Trust. My pleasure, Will.
00:08:10
Speaker
So you've been listening to Uncovering Trust, a podcast by Edison Group. For more information on the Invesco Asia Dragon Trust and other investment companies we cover, visit edisongroup.com.