Trust set to make monopoly money from Asian airports

IT HAS been quite a week for the management and board of Utilico Emerging Markets. On Tuesday, the investment trust’s chairman John Rennocks stood on the balcony of the London Stock Exchange and proudly rang the bell, marking the opening of the market.

Rennocks and other board members and managers were there because the day marked the listing of the trust’s shares on the London Stock Exchange, after 13 years as a fund domiciled in Bermuda. A historic moment in the trust’s history, moving from incidental to mainstream.

‘We hope this move has the potential to improve investor perception about the trust,’ said Rennocks, after he had performed his duties.

‘A premium listing on the main market of the London Stock Exchange is generally considered to be the gold standard for investment companies.’

Also present was the trust’s manager, Charles Jillings of global investment house ICM, who has run the fund since its launch in the summer of 2005.

‘Yes, the listing in London gives the trust greater credibility,’ he says. ‘But more importantly it will make it easier for people to buy shares.’

Utilico is not a conventional emerging markets trust. Though it invests in a spread of markets and companies operating in emerging economies, the trust has a strong bent to utilities, communications and transport.

Jonathan Groocock, Mark Lebbell and Jacqueline Broers oversee these three hubs, looking for investment opportunities from some 900 potential stocks.

They are areas that Jillings has taken an interest in since the early 1990s, when he was managing the Foreign & Colonial Special Utilities Investment Trust with Duncan Saville, now ICM chairman. It means the trust’s 84strong portfolio has holdings in airports, toll roads and companies focused on power generation and transmission.

Jillings, who manages the trust from Epsom, Surrey, adds: ‘We are looking for businesses that tend to be monopolistic in nature and benefit from the urbanisation of emerging market economies, a process especially prevalent in Asia and particularly in China.’

Among the trust’s biggest holdings are stakes in Shanghai International Airport and Yuexiu Transport Infrastructure. Says Jillings: ‘Both these companies are benefiting from a growing middle class in China who are keen to enjoy their wealth and travel. It means Shanghai Airport is enjoying ever increasing passenger numbers and double digit annual revenue growth.

‘Yuexiu is seeing more Chinese motorists use the toll roads it operates.’

Although Utilico’s investment performance compares well against rival emerging markets funds, Jillings says he is not interested in relative comparisons. He is more concerned in delivering solid absolute returns for shareholders over the long term. In the last five years, the trust has done that, delivering an overall return of 33 per cent. A controversial performance fee is charged if the trust generates an annual return higher than eight per cent.

A by-product of the trust’s slant towards utility stocks is the generation of a half-decent income, which is payable to shareholders quarterly. The trust’s shares currently yield 3.3 per cent.

Since launch, the annual dividend has never been cut, a stance that the board, enthused by last week’s day in the City spotlight, are keen to uphold.