Disclosure – Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
Utilico Emerging Markets (UEM) offers a different set of exposures to the average emerging market fund, focusing on the infrastructure and utilities sectors and on Latin America rather than North Asia. The trust owns a portfolio of companies chosen for their strong positions in their industries, which should allow them to generate high shareholder returns over the long term, with an aim of harnessing the growth potential in the rise of the emerging markets middle classes.
The trust has performed strongly over the long term, with five year returns ahead of the index and peer group despite not being exposed to the fashionable, higher-growth sectors of information technology and consumer discretionary. The trust has tended to do better in down markets while making less than the market in rising markets, which is unsurprising given the bias to defensive sectors.
The more defensive sectors the trust invests in tend to pay higher dividends, and so the yield is significant, at 3.1%. However, the objective of the trust is to generate total returns, so income is not prioritised over capital returns. The dividend has been grown or held each year over the past decade, however.
The trust trades on a discount of 12.5%. This is tighter than the average for 2018, when emerging markets were out of favour, but wider than the five-year average of 10.8%. In 2018, UEM redomiciled to the UK from Bermuda, in an attempt to make the trust more attractive to investors and close the discount. The trust has also carried out regular buybacks when the discount widens into double figures.
The trust is managed by specialist fund manager ICM, and a team headed by Charles Jillings and Duncan Saville. The management team and directors have substantial shareholdings in the trust.
There is a performance fee, charged at 15% of the NAV total returns in excess of 8% (or the benchmark plus 2% when that is higher). There is a high watermark and the fee was last charged in 2017.
Kepler Partners LLP considers this commentary to be a minor non-monetary benefit, as it:
1. Is intended to enhance the quality of service provided to you by us and is generic in nature;
2. Consists of short-term market commentary on the latest economic statistics and/or company results and/or information on upcoming releases or events;
3. Contains a brief summary of the author’s own opinion on such information;
4. Is not substantiated nor does it include any substantive analysis;
5. Reiterates the Kepler Partner LLP’s view on an existing recommendation or substantive research material; and/or
6. Is unlikely to impair your investment firm's compliance duty to act in the best interest of your client.
This report has been issued by Kepler Partners LLP for communication only to eligible counterparties and professional clients as defined by the Financial Conduct Authority. Its contents may not be suitable for and are not to be communicated to or be relied on by retail clients. It is not an indication as to the suitability or appropriateness of investing in the security or securities discussed.
Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that Independent financial advice should be taken before entering into any financial transaction.
The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.
The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.
This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.
Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.
PLEASE SEE ALSO OUR TERMS AND CONDITIONS
Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.
Fund History: Utilico Emerging Markets
Two of our analysts go head-to-head, debating whether gold is the ultimate safe haven asset...
We look under the hoods of Global sector trusts to see which offer the best diversification prospects for UK investors...
Amid economic weakness, there are high quality European companies delivering long-term returns says BlackRock’s Stefan Gries...
Certain beliefs persist around smaller companies: they are domestic in focus, can be volatile and may be illiquid. For these reasons, many investors often avoid this area of the market. In our view...