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JP Morgan to launch Global Emerging Markets Income Trust

7th June 2010 Print

J.P. Morgan Asset Management has announced its intention to launch the first investment trust focused on dividend income and capital growth from global emerging market companies, the JPMorgan Global Emerging Markets Income Trust.

The new investment trust will aim to offer investors access to a diversified portfolio of dividend-paying companies across global emerging markets, thus providing investors with a new source of equity income coupled with capital growth. The new investment trust will be managed by Richard Titherington, Chief Investment Officer and Head of the J.P. Morgan Asset Management Emerging Markets Equity Team.

Global emerging markets for both income and growth

Global emerging markets, which have traditionally been viewed purely as a source of growth for investors, are now maturing into consistent income generators. This is due to emerging market companies adopting an increasingly disciplined approach to both investment and the interests of shareholders, which has been reflected in falling levels of debt and a willingness to pay dividends.  Even during the very recent economic crisis many have maintained robust payout ratios in excess of 30%. Analysis demonstrates that over the last decade emerging markets outperformed the FTSE 100, whilst higher yielding emerging markets equities have outperformed the broader MSCI Emerging Markets Index over the same period.

Richard Titherington, manager of the JPMorgan Global Emerging Markets Income Trust explains, "The opportunities we are identifying in global emerging markets from an income perspective are compelling. Over the last seven years we have witnessed significant growth in the number of emerging market stocks, growing four-fold since 2003, therefore facilitating healthy diversification and an ever increasing universe for investment. In addition, positive fundamentals and strong underlying company performance is offering investors with a higher risk tolerance a powerful combination of capital growth and appealing dividend income yields."

David Barron, Head of Investment Trusts at J.P. Morgan Asset Management, said, "Traditionally UK investors have looked close to home for equity income, but with UK equity income becoming increasingly dependent on just a few companies and sectors, we believe investors should be looking more widely to satisfy their search for equity income and growth. Therefore a new investment trust which utilises a new, yet rapidly growing, source of dividend income is very timely."

Investment trust structure

Investment trusts are ideally suited to invest in more illiquid markets as their ability to maintain portfolio stability through their closed end structure, whilst accessing smaller and less liquid stocks provides a broader investment universe. This closed ended nature, and as such absence of redemptions, also reduces the need to sell cum-dividend. In addition, investment trusts further benefit from the ability to build up revenue reserves, meaning an investment trust can retain up to 15% of its revenue each year to and use it to smooth future dividend payments.

The JPMorgan Global Emerging Markets Income Trust will seek to deliver a 4% target yield at inception and would look to offer a progressive dividend. The portfolio will aim to have 50 - 70 holdings in global emerging markets equities. The Company will measure its performance against the MSCI Emerging Markets TR Net Index (GBP).

Winterflood Investment Trusts is acting as sponsor.

Investors can register their interest at jpmglobalemergingmarkets.co.uk from 7th June.