Utilico Emerging Markets (UEM) Trust has managed to beat its benchmark, MSCI EM, by 7% in October despite strong headwinds for the asset class the company’s half year report revealed. 

Despite a strengthening dollar and populist political movements not aiding the emerging markets cause, the manager, Charles Jillings (pictured), has managed to steer this investment trust to benchmark beating performance.

 It’s not all good news, the trust’s net asset value per share was down 7.5 percent in the six months to 30 September this years.

However, the company also managed during the first half to narrow its discount to NAV from 14.2 percent to 13.6 percent. 

President Donald Trump’s ‘America first’ approach is causing havoc on emerging market economies. The company said that the level of market volatility that has resulted from his policies has been much higher than expected. In Sterling terms, over the six months to 30 September 2018, the S&P 500 Index was up 18.6% and the Brazilian B3 was down 17.9%. Much of the difference is down to very strong US GDP figures and a strong US dollar while emerging markets have generally seen weakening currencies against Sterling. In addition, Brazil suffered from political uncertainty over the election outcome.

The trust’s 39% exposure to Latin America and Brazil in particular contributed to much of the under-performance. As said the B3 was down but the Argentinean Merval Index was also down 42.9% over the same period.

Mr Jillings added: “UEM’s strategy has remained unchanged over the past six months focusing on listed companies which are predominately profitable, offering long-term growth, and paying dividends. Notwithstanding the recent performance, valuations remain attractive as growth in profitability has largely outpaced share price appreciation in the investee companies.”