Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

James Burns: how Utilico EM is plumbing into emerging yield

James Burns: how Utilico EM is plumbing into emerging yield
One of the longest-standing themes in my fund of investment trusts has been that of power, infrastructure and energy.

Ecofin Water & Power Opportunities, Premier Energy & Water and Utilico Emerging Markets have been my selections to play out these themes. The one holding that has really stood out this year has been Utilico: emerging markets have struggled but it has posted strong performance.

The company was launched in 2005 and invests predominantly in infrastructure, utilities and related sectors. There is an emphasis on ports, toll roads and rail investments, as well as water and waste.

The approach has no style bias but manager Charles Jillings and his team target companies that display the characteristics of essential services or monopolies.

Most holdings boast strong management, are asset-backed, have good cash flows and offer good dividend yields.

Conviction calls

In terms of geography, Brazil has been a conviction call. This remains the case although it has reduced recently due to relatively poor performance.

I agree with the managers’ assessment that there are still some great opportunities there regardless of the broader issues.

Chinese exposure is almost entirely through Hong Kong and remains the biggest weight in the portfolio which, having visited the region in recent years, I am very comfortable with.

What also makes Utilico attractive is that it pays a dividend yield of around 3.5%, and I am very conscious about the important role that dividends can play to enhance returns for investors in my fund.

Unlike most other investment companies with a yield, Utilico can be bought at a discount to asset value.

The board has had to dip into its capital reserves to support the dividend for the past two years but Jillings expects that the dividend will be fully covered by earnings within a year or so.

Since its launch this vehicle has tended to lag in strong market rises but perform better in weaker times.

As ever for a fund manager, it is important to get a good and complimentary balance of stocks covering a theme or a sector in a fund, and Utilico, along with Ecofin and Premier, provide this for me.

James Burns manages the Smith & Williams multi-manager desk and runs the Smith & Williamson MM Global Investment Fund

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play WMR: Why Russia will lose this war

WMR: Why Russia will lose this war

Author and journalist Adam Lebor believes a perfect storm is brewing when it comes to the Russian economy. .

Play WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

Chief economic adviser to London mayor Boris Johnson outlines the geo-political risks in Asia and explains why the risk of another eurozone crisis must not be underestimated.

Play Japan's slump, the umbrella revolution and the battle for Brazil

Japan's slump, the umbrella revolution and the battle for Brazil

With the arrows of Abenomics appearing to be missing their targets and political uncertainty rife in Hong Kong and Brazil we take a look at investor sentiment in this week's Investment Pulse

Your Business: Cover Star Club

Profile: The adviser that tempted Robin Minter-Kemp on board

Profile: The adviser that tempted Robin Minter-Kemp on board

It is rare to meet an impassioned individual who is willing to bang the drum for investment advisory right now

Wealth Manager on Twitter