Underappreciated emerging and frontier income access
Jupiter Emerging & Frontier Income (JEFI) offers unique access to well-positioned emerging and frontier market companies in many countries where economic activity has largely returned to normal. Perhaps for the first time, companies based in the likes of Taiwan, South Korea, and even Kenya can arguably have greater confidence in their ability to deliver dividends at pre-pandemic levels than those based in developed markets. Promising recent news on the vaccine front could see sentiment improve in some of JEFI’s hardest-hit markets, like Brazil, India, and Mexico.
JEFI provides less exposure to China than some of its peers, as its manager, Ross Teverson, felt that greater value could be found in the likes of Hong Kong, Taiwan, and Mexico. As we explain on page 15, this, and the withdrawal of funds from many emerging and frontier (EM and FM) markets, has held back returns in recent months and the discount has widened. Still, JEFI’s shares are currently yielding 5.4% and, with around a third of the portfolio sitting on net cash and debt levels typically lower than those of the developed world, equity income investors do still have good options in JEFI’s chosen markets. Long-term capital and income growth
JEFI aims to generate capital growth and income over the long term, through investment predominantly in companies exposed directly or indirectly to emerging markets and frontier markets worldwide. Signs of further green shoots across emerging and frontier markets
China has undergone a remarkable turnaround since February, with economic activity returning to near-normal levels in just a few months. Led by its technology behemoths and pushed on by resurgent domestic retail investors, China is the best performing major global equity market so far this year, as Figure 1 illustrates. The fact that China accounts for over 40% of the MSCI Emerging Markets Index (JEFI’s benchmark) largely explains that index’s performance.
The stock-picking style favoured by Ross means that JEFI’s portfolio only loosely resembles the benchmark. Much more emphasis is placed on the fundamentals of the businesses that it invests in. As discussed in the asset allocation section, the manager believes that greater value can currently be found in the likes of Hong Kong, where many companies trade at discounts to their Chinese-mainland peer group. While the performance of China, and to a lesser extent Taiwan and South Korea, has generated a lot of interest, many countries across the […]