Pacific Asset Management has launched the Pacific North of South EM Equity Income Opportunities Fund, a high yielding concentrated portfolio.
The Irish UCITS fund will invest in 50-60 emerging market stocks across the market cap spectrum, with an estimated gross forward yield of above 8%. By comparison, the weighted average 10-year bond yield available on the portfolio’s country exposure is 4%, said Pacific Asset Management.
The new fund will be headed up by Matthew Linsey, Kamil Dimmich and Robert Holmes. Linsey and Dimmich also manage the $1 billion Pacific North of South EM All Cap Equity strategy, which has outperformed in 8 of the past 10 years.
The team will target mature well-run businesses in countries with low volatility currencies and look to capture a high yield from a relatively concentrated portfolio of companies selected for their sustainable dividend characteristics.
Matthew Lamb, CEO, Pacific Asset Management, said: “We are really excited about this limited capacity opportunity. We have already seen significant interest from a number of cornerstone investors, which underlines the desire for attractive income and inflation protection through high-quality dividend paying firms across the emerging market spectrum.
“The fund management team have an enviable ten year plus track record and this fund adopts the same long-standing cost of capital and bottom-up research focused investment process. A truly “craft” investment solution in a world of many industrialised asset management offerings.”
Matthew Linsey, fund manager, commented: “Emerging market firms are, in general, seeing elevated EBITDA and relatively low CAPEX leading to high free cash flows. Unlike US firms where buy-backs are the order of the day, emerging market firms tend to distribute.
“Unlike many emerging market income funds, which are often entirely Asia-driven and benchmark orientated, we will invest in the best names in low cost of capital countries across the emerging market universe while offering a very attractive yield. Moreover, we see this in the context of real returns, and we believe this fund could be a truly attractive inflation hedge.”
