James Carthew: Early exit offer makes Ashoka trust less of a leap
It is good to see some signs of life in the investment company IPO market after an extended hiatus, as the team behind Ashoka India Equity (AIE) has a go at launching a £100m trust with a wider emerging markets remit.
Money has flooded out of the investment companies’ global emerging markets sector with the loss of funds such as Jupiter Emerging and Frontier Income and Fundsmith Emerging Equities, plus Aberdeen Emerging’s reincarnation as Abrdn China (ACIC).
Generally, funds in the sector have managed to make positive returns for investors in recent years, even after the knock from China’s Covid lockdowns, and the fallout from the invasion of Ukraine. However, with the notable exception of Mobius (MMIT), which I discussed last November, most trusts in the sector trade on discounts.
The big picture investment case for emerging markets has not much changed over past decades: demographics, faster growth, the rise of the middle class, under-researched companies, and lower valuations. However, the 10-year returns from the sector are well behind those of developed market equities. Investors in the developed world, especially those in the US, have a strong tendency to pull money out of emerging market stocks when they are feeling risk averse.
read more here