5th Mar 2020 13:53
(Alliance News) - Fundsmith Emerging Equities Trust PLC on Thursday reported a fall in its net asset value for 2019 and said it underperformed its benchmark in the period.
The stock was trading 0.1% higher at 1,070.55 pence each on Thursday afternoon in London.
As at the end of 2019, the fund's NAV per share stood at 1,213.0p compared to 1,222.0p at the end of 2018, reflecting a 0.7% fall.
Fundsmiths NAV total return was negative 0.5% while its benchmark, the MSCI Emerging & Frontier Markets index, posted total return of 13.9%.
The company said the "disappointing performance" was as a result of substantial inflows into exchange traded funds inflating the prices of larger but poorer-quality companies not in its investment universe.
"The composition of the index is very different to our portfolio. Emerging markets experienced net outflows of USD17.7 billion. This net outflow figure was comprised of net inflows into emerging markets ETFs of almost USD14 billion which were dwarfed by net outflows from "active" funds of USD31.6 billion. At present we have no investments in any of the top 10 Index constituents which include Alibaba and Tencent".
During the year, the company issued 250,000 new shares, raising gross proceeds of GBP3.0 million. As at the end of the period, the company's share capital comprised 26.6 million shares.
It declared a final dividend of 3.2p per share, but noted the payout was only to retain its status as a UK investment trust.
Looking ahead, Fundsmith said it expects considerable volatility in emerging markets to persist with geopolitical factors likely to continue affecting global economic growth in 2020. It added that the outbreak and spread of the coronavirus is likely to cause disruption.
"While there will inevitably be periods of volatility, we remain optimistic on the longer-term outlook for emerging markets. Fundsmith will remain focused on selecting high-quality companies with superior returns on capital, profit margins and growth than many of the companies in the Index," said Chair Martin Bralsford.
By Ife Taiwo; [email protected]
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