JUPITER EMERGING & FRONTIER INCOME: The adventurous investment trust with a 4.5% yield that is set for take-off in the long term
Although it is still early days for Jupiter Emerging & Frontier Income, this stock market-listed investment trust has got off to a rather dull start.
Since launch in May 2017, its share price has moved ahead, albeit minutely, from £1 to £1.03.
The redeeming feature is that the dividend, paid half-yearly, has increased by 10 per cent year on year, and currently provides shareholders with an attractive annual yield of 4.5 per cent.
Since launch in May 2017, its share price has moved ahead, albeit minutely, from £1 to £1.03
The trust, with a market capitalisation of £91million, is run by Ross Teverson and Charles Sunnucks from Jupiter’s offices in London. But the managers travel the world in search of undervalued companies that offer the potential for dividend growth – immediately or in the future.
It takes them to countries such as Kenya and Nigeria in Africa – both deemed to be ‘frontier’ stock markets – and Taiwan and China in Asia (established emerging markets).
The result is an eclectic portfolio, comprising just 45 stocks invested across 22 countries, although Teverson prefers to describe the trust as ‘diversified’. The emphasis, he says, is on constructing a fund comprising stocks listed on frontier or emerging markets that in time will deliver a mix of capital gain and income growth.
While the pair are happy to buy shares in companies listed on far flung stock exchanges – for example, Indus Motors whose shares trade on the Karachi Stock Exchange – they have plenty of safeguards in place to ensure shareholders are not exposed to unnecessary risk.
So the trust holds no unquoted companies and the shares in companies it buys must be able to be traded daily.
The trust holds no unquoted companies and the shares in companies it buys must be able to be traded daily
No holding represents less than one per cent of the portfolio or more than five per cent – with the managers selling down positions as they approach the five per cent cap.
‘We want every stock to contribute to performance,’ says Teverson. ‘Equally, we don’t want any one stock to become the major driver of the trust’s overall investment return. We want diversified sources of alpha – that is returns above that generated by the market.’
The emphasis, says Teverson, is on buying undervalued companies where there is the prospect of ‘positive change’.
Most are identified by meticulous quantitative analysis conducted in-house at Jupiter that highlights companies whose shares are attractively priced with the potential to deliver strong earnings growth. All companies are visited and management quizzed regularly via conference call.
Despite the focus on the world’s less developed stock markets, the portfolio is not without its familiar names. Samsung Electronics is a top 10 holding as is NetEase, China’s second largest manufacturer of mobile phone games behind Tencent.
Both companies, says Teverson, are increasingly ‘dividend-friendly’. He adds: ‘NetEase hands over a quarter of its earnings in dividends while Samsung is operating in a semi-conductor market where manufacturing is now concentrated in the hands of three companies. It gives Samsung scope to increase future profits, something that is not reflected in the valuation of the company’s shares.’
The fund has an annual management charge of 0.75 per cent, but extra fees push the total yearly charge to 1.35 per cent. Teverson is hopeful that this fee will reduce as and when the trust’s assets grow.