Baring Emerging Europe heads for Middle East and Africa – Baring Emerging Europe has announced a proposed change of investment policy which will diversify the current mandate’s geographical scope to include the whole of Emerging Europe, the Middle East and Africa (“EMEA”) including, as opportunities arise, investing in select frontier markets within the EMEA region. The benchmark would become the MSCI Emerging Markets EMEA Index. This still needs to be approved by shareholders.
Part of the rationale is that this will allow the reduction of the portfolio’s hydrocarbons exposure and the concentration of its political/country risk (currently Russia dominates its benchmark). It also taps into the manager’s expertise in this area, the existing Baring’s EMEA team, manage £1.2bn of assets in the region. There is also mention of delivering an attractive level of income.
The board intends to change the name of the company to “Baring EMEA Opportunities PLC”.
Baring Fund Managers has agreed to a reduction in the investment management fee from 0.80% to 0.75% of NAV.
City of London Investment Management Company, which holds 25.8% of the issued share capital, has indicated its support for the proposals.
Proposed investment objective
To achieve capital growth, principally through investment in emerging and frontier equity securities listed or traded on EMEA securities markets. The company may also invest in securities in which the majority of underlying assets, revenues and/or profits are, or are expected to be, derived from activities in EMEA, but which are listed or traded elsewhere.
Discount management
For the four year period ending 30 September 2020 the board had set targets relating to the company’s performance and discount that, if not met, would have triggered a tender offer for up to 25% of the company’s shares. As previously announced, a tender offer was not triggered.
The board has decided, subject to shareholder approval of the new policy, to set new tender offer trigger mechanisms for the five year period commencing 1 October 2020. It will offer shareholders a tender offer for up to 25% of the issued ordinary share capital if:
- the average daily discount exceeds 12% over the period between 1 October 2020 and 30 September 2025; or
- the NAV total return performance does not exceed the return on the MSCI Emerging Markets EMEA Index (net) by an average of 50 basis points (0.5%) a year over that five-year period.
[The move makes some sense to us. The old Baring Emerging Europe was effectively just a bet on Russia, by broadening the remit, the manager has access to a much wider pool of assets. The only question in our minds is: who wakes up in the morning wanting an investment in all of emerging Europe, Africa and the Middle East? Investors have plenty of options when it comes to global emerging markets funds, and some options for frontier market funds, Middle Eastern funds and African funds. Time will tell how popular the remit is but we doubt Barings EMEA Opportunities will have a competitor snapping at its heels to worry about any time soon.]