Premier Asset Management’s multi-manager team has opened up a 4 per cent position in emerging markets within its £263.2m Multi-Asset Distribution fund.
Simon Evan-Cook, portfolio manager, said the team had been building a position in Charlemagne Capital’s €227m (£190m) Magna Emerging Markets Dividend fund since last year, which had now reached a significant portion of the portfolio.
It is the first time the team, led by David Hambidge, has held an emerging market income product in the Multi-Asset Distribution portfolio.
“This is a highly active fund,” Mr Evan-Cook said. “If you buy at the index level in emerging markets you get a lot of exposure to companies which are not good enough. Charlemagne has been able to avoid a lot of the drops in the benchmark.”
The Magna Emerging Markets Dividend fund is run by Julian Mayo and has a historic yield of 5.1 per cent. Since its launch in June 2010 to March 17 the fund has gained 16.1 per cent according to FE Analytics, while funds in the IMA Global Emerging Markets sector lost an average 2.8 per cent.
Across Premier’s other funds Mr Evan-Cook said the team had been “edging back into” emerging market funds after last year’s sell-off, although many of the group’s growth-orientated portfolios had retained higher levels of exposure to the asset class.
These funds, the manager said, had done better than expected as the underlying managers had avoided the worst-affected areas such as commodities stocks and Chinese banks.
Elsewhere in the Multi-Asset Distribution fund, Mr Evan-Cook said the team had also sold down its entire exposure to infrastructure investment trusts as high demand for the high-yielding asset class drove premiums to levels that were “very expensive”.
The manager added: “We are not reaching for yield. Now is not the time to stretch for high yields in assets that don’t represent a good balance between risk and return.”
Instead the managers have added to holdings in open-ended commercial property funds “for the first time in a long time”, in spite of an aversion to the need of such funds to hold high levels of cash to meet redemptions.
“We started buying property funds late last summer,” Mr Evan-Cook said.
“Everything else got expensive and property didn’t really move. If you strip out the income then property is still selling for about the same price as it was in 1999.
“It hasn’t had a re-rating so a 20 per cent drop in value is quite unlikely. You can’t say that for equities.”
Three of Premier’s emerging market picks
Charlemagne Magna Emerging Markets Dividend
Julian Mayo’s €227m fund has outperformed its IMA peer group since launch in June 2010, and with a yield of 5.1 per cent offers an attractive level of income. As well as investing in Brazil, Taiwan and China, the fund also holds positions in more unusual markets such as Nigeria and Saudi Arabia.
Lazard Developing Markets
Lazard’s £11.5m fund, run by Kevin O’Hare and Peter Gillespie, has had a difficult start to life since its launch in September 2010. In that period it lost 25.3 per cent, compared with a 9.9 per cent average loss from funds in the IMA Global Emerging Markets sector, due in part to holdings in energy and materials-related stocks which have been hit hard by the recent sell-off.
Fidelity FAST Emerging Markets
This long/short equity portfolio has performed strongly since its launch in October 2011, gaining 24.5 per cent as the MSCI Emerging Markets index fell 2.1 per cent. Managed by Nick Price, at the end of January the portfolio had a book of short positions – bets that stock prices will fall – equal to roughly 31 per cent of the value of the portfolio.
