Aim: Income and growth by investing in a portfolio of high yielding emerging market equities
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 100% in emerging market equities
Isa link: Yes
Charges: Initial 4%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 587 2111
The UBS emerging markets equity income fund aims for income and growth by investing in a portfolio of high-yielding emerging market equities.
Bright Financial Services director Paul Breaks says: “The fund aims to provide income from emerging markets. The rationale is that emerging markets now offer investors exposure to well-established, bigger stocks that can provide sustainable, high dividend yields.
Breaks thinks the timing of this launch is appropriate in a number of ways. “UK investors have usually concentrated on local investment for income. But the opportunity to achieve reliable delivery has diminished, albeit with signs of recovery such as BP and ITV coming back to the fold.
“Given that life expectancy is increasing, there is a growing need for income with the potential for capital growth. As well as this many companies within developed markets face the burden of increasing pension fund liabilities. “
Breaks points out that emerging market companies tend to have cash, low levels of debt and offer tremendous growth prospects. “The fund will hold 40-90 large cap, well developed stocks. It offers a diverse alternative to UK income funds in the worlds fastest growing sector,” says Breaks.
He observes that management team at UBS is responsible for in excess of $25bn in emerging market and Asian equities. Fund managers Urs Antonioli and Projit Chatterjee have 15 and 10 years experience respectively.
Considering the potential drawbacks of the fund Breaks says: “There is nothing I dislike about it. The usual caveats apply however, about the potential for higher volatility, currency risk and not putting all your eggs in one basket.”
Discussing potential competitors Breaks says: “Competitors will include the recently launched Polar Capital emerging markets income fund, which is run by the former Axa Framlington team hired by Polar Capital in October 2010.” He adds that the soon to be launched JP Morgan Emerging Equity Income fund may also compete.”
Summing up, Breaks says: “Many emerging markets have pretty well emerged. Arguably, there is a two-tier range with the upper tier offering lower volatility but still with strong growth prospects. I would put the UBS fund is in that upper tier.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average