Managers of the Utilico Emerging Markets Trust, a UK-listed investment trust, marked its 20th anniversary on the London Stock Exchange this month, and outlined investment opportunities in emerging markets.

Optimistic sentiment about emerging markets – and infrastructure in particular – is gaining momentum, portfolio managers say. 

Charles Jillings and Jacqueline Broers, co-portfolio managers of the Utilico Emerging Markets Trust, highlighted at a media event that emerging markets have been outperforming developed markets, and long-term prospects look favourable.

Their portfolio is focused on defensive sectors such as utilities and infrastructure, positioning it to weather near-term volatility more effectively than the broader market.

Jillings drew attention to the strong GDP growth in emerging markets, with India still being one of the fastest growing economies, even though it has been hit by 50 per cent US tariffs.

M&G also recently highlighted that the economic impact of tariffs in India and Brazil is less than the political noise suggests. “The impact of 50 per cent tariffs on India is limited as domestic consumption is the main driver of growth not exports. The economic impact on Brazil is also limited,” Charles de Quinsonas, head of emerging market debt at M&G, said.

Wealth managers are reconsidering global asset allocation by shifting some money out of the US and into Europe, Asia and emerging markets. A number of firms, such as London-based GIB Asset Management and California-based Franklin Templeton, are also positive about emerging markets. Even as global uncertainty rises, Franklin Templeton believes the market to be underestimated and under-owned. See more here and here. (Also read two recent features about the evolving world of asset allocation here and here.)

Middle class impetus
Jillings said the growth of the middle-class is driving the need for better social infrastructure in these countries while decarbonisation of the energy matrix is supporting strong economic growth. Rapid digital adoption is also accelerating demand for digital infrastructure, she added. Emerging markets have an increasing importance in the share of world trade, she said.  

Despite macro volatility and geopolitical uncertainty, Jillings and Broers believe that investment in infrastructure will continue.

Utilico Emerging Markets Trust (UEM)
Jillings and Broers co-manage the Utilico Emerging Markets Trust (UEM), which specialises in assets benefiting from long-term infrastructure megatrends providing potential for sustainable growth, such as social and digital infrastructure, energy growth and transition, and global trade.

UEM has a big interest in Latin America, where companies can exhibit monopolistic characteristics.

Despite the 50 per cent US tariffs on Brazil, Jillings and Broers remain invested in Brazil. This includes an investment in Brazilian waste management company, Orizon, which operates 17 sanitary landfill sites.These sites collect and use biogas – an operation which generates carbon credits.

The managers are also invested in the growth-oriented market of India. In particular, they invest in IndiGrid, an infrastructure investment trust, which develops and operates transmission lines, solar generation and battery energy storage in India. They believe it is well positioned to benefit from India’s rising power demand and green transition.

The country is also favoured by other wealth managers such as French asset manager Amundi due to its strong GDP growth and lower exposure to US trade. See more commentary here. 

Jillings and Broers are also keen on the Philippines, with investments including Philippines-listed International Container Terminal Services (ICT) which acquires, develops, manages and operates small- to medium-sized container ports and terminals. It operates 33 terminals in 20 countries. Another investment is the Manila Water Company and SUNeVision, the largest data centre operator in Hong Kong with eight data centres and two cable landing stations, capitalising on the digital infra trend.