Given the volatility we’ve seen of late in emerging markets generally, a number of emerging market equity investment trusts are currently trading at a discount that’s wider than their long-term average, which could provide an attractive entry point for a long-term investor.
In this article we will look at three investment trusts that on November 4 traded at attractive discounts relative to their long-term average: that is, below their six-month and three-year average discounts. Furthermore, all three trusts are rated Bronze, which means they distinguish themselves in terms of strong fundamentals compared with their category peers.
Aberdeen New Thai (ANW) is run by three portfolio managers based in Bangkok, led by Adithep Vanabriksha and they’re supported by two further portfolio managers in Singapore with whom they coordinate their investment decisions. The Singapore team itself is stable and headed by Hugh Young and it’s a team we hold in high regard. Not only do the team members have depth of experience, many of them have been with Aberdeen for more than a decade. The team follows Aberdeen’s firm-wide process that has outperformed its category peers without taking excessive risk, too.
JPMorgan Indian (JII) is run by an experienced duo in Rukhshad Shroff and Rajendra Nair, who can also leverage a Mumbai-based team of four. Granted, that’s quite a compact team, but the team’s focus on large-cap companies, combined with their low-turnover approach, mitigates our concerns about their workload. The process is thorough. The managers pay great attention to earnings and management and they will meet with companies before initiating a position, owing to their preference for quality; that has helped to protect the fund a little in sharply negative years such as 2008, 2011 and 2013 to end of October, although the impact is modest. We also like the fund’s simple fee structure; there is no performance fee and overall ongoing charges are competitive when compared with its Morningstar India Equity category median fund.
Baring Emerging Europe (BEE) has seen a notable improvement particularly since mid-2012 when Michael Levy joined Baring to focus on stock selection in Russia. Before, the fund’s manager Matthias Siller had to spend a disproportionate amount of time analysing Russian stocks, given their dominance of the MSCI EM 10/40 index. So he is now able to spend more time focused on stock selection in the remaining counties, and indeed has been adding value through these positions; further, performance has picked up in the Russian part of the portfolio, too.
All said, though, investors should remember that emerging-market offerings are subject to numerous external risks such as political unrest, corruption and illiquidity and even good funds should be used in right doses, and with a long-term time horizon.
