Managers of the Utilico Emerging Markets Trust, a UK-listed investment trust, marked its 20th anniversary on the London Stock Exchange this month, and outlined investment opportunities in emerging markets.
Optimistic sentiment about emerging markets – and
infrastructure in particular – is gaining momentum, portfolio
managers say.
Charles Jillings and Jacqueline Broers, co-portfolio managers of
the Utilico
Emerging Markets Trust, highlighted at a media event
that emerging markets have been outperforming developed markets,
and long-term prospects look favourable.
Their portfolio is focused on defensive sectors such as
utilities and infrastructure, positioning it to weather near-term
volatility more effectively than the broader market.
Jillings drew attention to the strong GDP growth in emerging
markets, with India still being one of the fastest growing
economies, even though it has been hit by 50 per cent US
tariffs.
M&G also recently
highlighted that the economic impact of tariffs in India and
Brazil is less than the political noise suggests. “The
impact of 50 per cent tariffs on India is limited as domestic
consumption is the main driver of growth not exports. The
economic impact on Brazil is also limited,” Charles de Quinsonas,
head of emerging market debt at M&G, said.
Wealth managers are reconsidering global asset allocation
by shifting some money out of the US and into Europe, Asia
and emerging markets. A number of firms, such as
London-based GIB Asset
Management and California-based Franklin
Templeton, are also positive about emerging markets.
Even as global uncertainty rises, Franklin Templeton believes the
market to be underestimated and under-owned. See more
here and
here. (Also read two recent features about the evolving
world of asset allocation
here and
here.)
Middle class impetus
Jillings said the growth of the middle-class is driving the need
for better social infrastructure in these countries while
decarbonisation of the energy matrix is supporting strong
economic growth. Rapid digital adoption is also accelerating
demand for digital infrastructure, she added. Emerging markets
have an increasing importance in the share of world trade, she
said.
Despite macro volatility and geopolitical uncertainty, Jillings
and Broers believe that investment in infrastructure will
continue.
Utilico Emerging Markets Trust (UEM)
Jillings and Broers co-manage the Utilico Emerging Markets
Trust (UEM), which specialises in assets benefiting from
long-term infrastructure megatrends providing potential for
sustainable growth, such as social and digital infrastructure,
energy growth and transition, and global trade.
UEM has a big interest in Latin America, where companies can
exhibit monopolistic characteristics.
Despite the 50 per cent US tariffs on Brazil, Jillings and
Broers remain invested in Brazil. This includes an
investment in Brazilian waste management
company, Orizon, which operates 17 sanitary landfill
sites.These sites collect and use biogas – an operation
which generates carbon credits.
The managers are also invested in the growth-oriented market of
India. In particular, they invest in IndiGrid, an infrastructure
investment trust, which develops and
operates transmission lines, solar generation and battery
energy storage in India. They believe it is well positioned to
benefit from India’s rising power demand and green transition.
The country is also favoured by other wealth managers such
as French asset manager Amundi due to its strong
GDP growth and lower exposure to US trade. See more
commentary here.
Jillings and Broers are also keen on the Philippines,
with investments including Philippines-listed International
Container Terminal Services (ICT) which acquires, develops,
manages and operates small- to medium-sized container ports and
terminals. It operates 33 terminals in 20 countries. Another
investment is the Manila Water Company and SUNeVision, the
largest data centre operator in Hong Kong with eight data
centres and two cable landing stations, capitalising on the
digital infra trend.