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As Terry Smith’s emerging market trust closes, where should investors turn?

Jennifer Hill from interactive investor, 20 December 2022:

We asked financial advisers, fund analysts and wealth managers to share 10 emerging market fund and investment trust ideas for shareholders in Fundsmith Emerging Equities Trust who are looking for a new home for their capital.

Shareholders in Fundsmith Emerging Markets Trust (FEET) overwhelmingly gave their blessing to liquidate the investment trust, which ultimately failed to add value.

Some may have been disappointed that there was no rollover option, which can be a tax-efficient way of allowing investors to sell at a time of their choosing…

As those who held shares in FEET receive most of their investment back and seek a new home for their capital, where do professional investors recommend?

Ashoka India Equity

At the end of October FEET had 43% in Indian equities. Shareholders who want to maintain this regional exposure and emulate the Fundsmith focus on quality and resilient growth businesses could consider the Ashoka India..

Templeton Emerging Markets

James Carthew, head of investment companies at QuotedData, suggests opting for FEET’s alma mater, Templeton Emerging Markets, which can be bought at a double-digit discount.

“Most trusts in the sector have seen their net asset value fall over the past year and TEMIT is no exception,” he says.

“It’s the second-best performing global emerging fund over that period but has failed to beat the MSCI Emerging Markets Index over most time periods to end-October.

“To us, that means performance must buck up or shareholders are going to start calling for the trust to go the way of FEET. Since the latter outcome would see a narrowing of the discount, this might be a win-win.”

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