Pictet Asset Management, the asset management arm of the Swiss private bank Pictet & Cie, is making its Pictet Emerging Markets High Dividend fund available to UK and European investors.
The fund is managed by Mark Boulton and Stephen Burrows who each have over 20 years investment experience.
Pictet has managed an Emerging Markets High Dividend fund for Japanese investors since 2007 (AUM of USD4.8bn at 6 November 2012).
The fund aims to capture strong and sustainable income from emerging market company dividends as well as long-term capital growth from increasing share prices and rising currency values. The annual distribution level is set conservatively at four per cent at launch NAV which can be distributed to investors monthly. The average gross yield of the stocks in the fund’s portfolio at the end of August was 5.8 per cent. This compares very favourably with yields available on various global assets, for example the current yield on the 10 year gilt is approximately 1.8 per cent.
“Most investors associate emerging markets with growth,” says Burrows. “But things have changed and you can now also get an attractive income from emerging markets. Combined with the long-term growth potential of these economies and potential gains from rising currency values, this fund offers interesting opportunities for investors.”
Pictet points to the closing gap between the developing and developed world in terms of dividend payouts. For example, in 1998, only 38 per cent of emerging market companies paid dividends but by 2011 this figure rose to 88 per cent. Furthermore, over this period, emerging market dividends grew at double the rate of those in the developed world and accounted for almost a third of an investor’s total return. Pictet believes this is set to continue as it is finding many high-quality, well established emerging market companies that generate high and sustainable levels of cash which can be paid back to shareholders as dividends.
Boulton says: “The increase in dividend payments is perhaps one sign that emerging market companies are moving toward greater transparency and a fairer treatment of minorities. Dividends are, after all, paid to all shareholders. Russia’s Lukoil and Gazprom for example have not only established credible dividend policies but, in the last 18 months, have moved to increase payouts.”
Pictet uses an active investment process which helps them select stocks with high and sustainable dividends and to avoid stocks where the yield is not sustainable or where the company has a weak outlook. The fund invests in growing companies with low debt to equity ratios and a history of steady earnings growth.
The fund will be structured as a compartment of the Pictet Luxembourg SICAV and is UCITS compliant. The annual management fee is 1.6 per cent. Income can be paid monthly, annually or reinvested.