‘My biggest success came from a traffic jam in Brazil’

The emerging markets of Asia and Latin America can be attractive to investors seeking higher returns, but many countries in these regions are prone to political and economic instability. Charles Jillings of the £498m Utilico Emerging Markets trust, which currently trades at a discount of around 11pc, told Telegraph Money why he ignores short-term currency fluctuations, how elections can change a country’s appeal and why being stuck in a traffic jam helped him find a successful investment.

Who is the fund for?

This is a long-term trust aimed at UK investors that looks to deliver a good yield. We invest in utilities and infrastructure in the developing world. Our portfolio includes ports, airports, roads and TV towers.

What do you look for in your investments?

More than 97pc of the fund is invested in listed companies. We mainly look at businesses that are up and running and generating cash. We look at the quality of the asset, the management team and the country.

Does investing in infrastructure mitigate some of the political risks in emerging markets?

No, I think it’s a feature of these markets. We have to invest time to understand the local political drivers.

Look at Thailand. We sold out due to the political difficulties in recent years. Now elections are coming around and it is beginning to look interesting again.

What do you try to avoid?

We flag any projects that would not be politically supported. If you look at China, we would avoid fossil fuel power generation because we know China is determined to clean up its environment and it has exerted pressure on fossil fuel power generation. That can open other

CV: Charles Jillings

Mr Jillings qualified as a chartered accountant at the University of Cape Town and has more than 30 years of experience in international l financial opportunities, so we are supporters of firms that are tackling waste in China.

Charles Jillings of Utilico Emerging Markets tells Adam Williams why it pays to visit every company in person

You have high exposure to Brazil. Why is the country so appealing?

Brazil is our largest investment today, but when we started in 2005 it was nearer 35pc of the portfolio. We then sold down to the point where Brazil was below 10pc. It was only 12 months ago that we developed a much higher appetite again as the currency was under strain because of the election.

Broadly we look to have no more than 30pc of the fund in any country, and no more than 10pc in any one investment. We’ve had investments reach 10pc, but we generally want to avoid overexposure to any one asset.

What has been your biggest success?

Rumo, a railway line operator in Brazil. One of its assets is a line between the Mato Grosso state and the Port de Santos. The state is the main producer of soya in Brazil and is seeing increased production, which means greater demand for transport. Rumo’s new management team identified a number of changes, which have improved the margins. That has been a strong performer.

Do you y visit each company in p person?

We visit v most of our investments over a two-year tw cycle. When we went to Mato Grosso to see Rumo we were stuck stuc in traffic for six hours among a load of trucks. That Th told me that the railway line was going to have an advantage. It’s simple things like that. It validates what we see on paper.

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