Aggregate dividend payments in the UK may be rising, but they are still alarmingly concentrated among a few very big companies. Investors have responded by looking overseas for equity income, prompting a raft of global equity income and emerging market income fund launches in recent years. But it's usually wiser to look for an established fund with a track record - like Utilico Emerging Markets, which was launched in July 2005.
A closed-ended, Bermuda incorporated fund, Utilico Emerging Markets seeks to provide long-term capital return by investing predominantly in infrastructure, utility and related companies in emerging markets. Given the nature of its underlying holdings, the fund also boasts an attractive yield of 3.5 per cent.
The fund is mainly focused on the developing markets of Asia, Latin America, emerging Europe and Africa, but has the flexibility to invest in markets world-wide. It can also invest across different asset classes, including non-investment grade bonds and unlisted securities. The only restriction is that a single investment may not exceed 20 per cent, while investments in a given country may not exceed 50 per cent.
The fund's largest exposure is to Brazil - currently 31.7 per cent, followed by China (18.7 per cent) and Malaysia (16.1 per cent).
The fund's bank debt was reduced to £5.6m during October, drawn entirely in US dollars, with cash balances reduced to £5.5m. The fund ended the month with a net debt of nil.
The fund is currently is trading on a discount to net asset value of 9.6 per cent making it an attractive buy compared to the many equity income trusts trading on a premium. While the fund is focused on a higher risk area, and is thus likely to suffer bouts of high volatility, its performance has held up well over the longer term.
| UTILICO EMERGING MARKETS (UEM) | |||
| PRICE | 147.125p | GEARING | 102.95 |
| AIC SECTOR | Global Emerging Markets | NAV | 160.98 |
| FUND TYPE | Investment Trust | PRICE DISCOUNT TO NAV | -9.60% |
| MARKET VALUE | £317m | 1-YEAR PRICE PERFORMANCE | -10.43% |
| No OF SHARES | 215.8m | 3-YEAR PRICE PERFORMANCE | 53.26% |
| SET UP DATE | 20 July 2005 | 5-YEAR PRICE PERFORMANCE | 24.68% |
| VOLATILITY | 16.65 | TOTAL EXPENSE RATIO | na |
| TRACKING ERROR | na | YIELD | 3.50% |
| SHARPE RATIO | -0.44 | MORE DETAILS | utilicoemergingmarkets.com |
Source: Thomson Datastream
Performance figures as at 15 November 2011
Top 10 holdings (as at 31 October 2011)
| Company | Percentage (%) |
| Malaysia Airport | 10.2 |
| Ocean Wilsons Holdings Ltd | 8.5 |
| Eastern Water Resources PCL | 5.2 |
| Cia Saneamento Minas Gerais (COPASA) | 4.7 |
| Santos Brasil Part | 3.5 |
| Companhia de Concessoes Rodoviarias (CCR) | 3.1 |
| Infrastructure India | 2.8 |
| Tractebel Energia | 2.7 |
| Asia Satellite Tele | 2.4 |
Sector Breakdown
| Sector | Percentage (%) |
| Ports | 27.2 |
| Water and waste | 18.8 |
| Road/rail | 11.5 |
| Airports | 10.7 |
| Electricity | 9.6 |
| Other | 6.1 |
| Infrastructure Investment Funds | 4.2 |
| Satellites | 3 |
| Gas | 2.4 |
| Telecoms | 2.2 |
| Other infrastructure | 1.9 |
| Renewables | 1.4 |
| Infrastructure IT | 0.6 |
| Post Office | 0.4 |
