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Trust Insider: after EMD disaster, emerging equity income's time to shine
by James Carthew on Aug 20, 2013 at 10:06
The portfolio is quite diversified with approximately 70 holdings, the biggest stock being just 2.1% of the fund at the end of June. JGEMI’s portfolio is truly global. Relative to the MSCI index, it is quite underweight South Korea, especially Samsung Electronics, which has had a bit of a tumble recently, and overweight South Africa. It is also overweight telecoms at the expense of financials.
Titherington points to JGEMI’s underweight in materials stocks and companies exporting to China as one reason for JGEMI’s decent performance. It might be worth noting that JGEMI could underperform if there is an improvement in sentiment towards those areas. The managers are convinced that emerging market stocks are cheap relative to history, citing 1.4 times price-to-book for the average stock as ‘compelling value’.
The circular that preceded the change of gearing policy also contained a change to the management fee arrangements whereby performance fees, calculated as 10% of the excess return above the benchmark, earned in excess of 0.75% of net assets in any year are now written off rather than being carried forward to future years.
The base management fee is 1% of net assets. I wonder whether, now the fund is getting to be a decent size, the board might consider negotiating a tapered fee with, say, a lower charge on net assets in excess of £500 million.
Dividends are paid quarterly and the final dividend for the accounting year that finished on 31 July has just been announced. It was marginally lower than the equivalent dividend last year, 2.1p versus 2.15p, but an increase in the previous interim offsets this so there has been modest growth in the annual dividend for the year, 4.9p versus 4.85p. My guess is that the managers intend to try to move towards a more even spread of income throughout the year, but shareholders might have hoped the final would be maintained and that JGEMI had managed to grow the income by a little more.
Given JGEMI’s success, I am surprised that there has not been a launch of a competing closed-end fund. In the absence of an alternative fund, however, I see no reason why JGEMI will not continue to expand from here.
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