Finding Yield in Emerging Markets
How strategic EM exposure has helped maintain yield generation
At a time when interest rates are at historic lows and are likely to remain low and when share dividends are scarce to non-existent, Australian financial advisers and their clients should be considering emerging market exposures.
That is the assessment of Premium China Funds (PCFM) Chief Investment Specialist, Jonathan Wu who has pointed to the relative return durability of funds which have maintained exposure to emerging markets, particularly Asia ex-Japan.
Wu said this was because major corporates in emerging markets had generally entered 2020 and the adverse circumstances generated by the COVID-19 pandemic carrying substantially less debt than their peers in other markets, particularly North America and Europe, and a good deal more cash to help them re-emerge from shut-downs.
He said the net result was exemplified by the relative performance of PCFM’s Premium Asia Income Fund which, because of its exposure to emerging market credit, had been able to maintain its consistent track record of distributions through the first six months of the year despite the broader adverse market conditions.
Wu said that in terms of yield across asset classes through the first six months of 2020, emerging market credit had significantly out-performed both Australian equities and Australian property and looked set to continue doing so.
He said that this had translated into the Premium Asia Income Fund generating a return of 6.1% net of fees over the three months to 30 June, this year, and 5.9% across a full 12 months.
Even allowing for the uncertainty and volatility which had characterised the first six months of 2020, it had generated a net return of 1.5%.
“The key has been sectoral exposure and the fund’s exposure to emerging markets has been fundamental,” Wu said.
ABOUT PREMIUM CHINA FUNDS MANAGEMENT
Premium China Funds Management (PCFM) is a boutique funds management group providing specialist Asian equity and fixed-income funds to both Australian and New Zealand investors.
Capturing the growing economies and influence of emerging Asia, PCFM has developed 4 actively managed funds – the Premium China Fund, Premium Asia Fund, Premium Asia Property Fund and Premium Asia Income Fund.
The funds are managed by a large and experienced team with offices in Hong Kong, Shanghai, Singapore and Kuala Lumpur. The directors and investment managers of Premium and its fund offerings have extensive knowledge in Asian equity and credit markets, wealth management, and other financial services.
Jonathan Wu – Executive Director | Head of Distribution and Operations | Chief Investment Specialist
0416 031 676
Derek Paas – Asia Investment Specialist | State Manager (NSW/QLD/WA/ACT/NT)
0406 608 388