TCM Global Frontier High Dividend Equity invests in stocks listed on the local exchanges of the Frontier Markets Universe. To set up the portfolio the fund will make a selection of countries on the basis of quantitative and qualitative screening. By using these selection criteria the fund will have a diversified portfolio invested in several countries and sectors. The equally weighted portfolio will be re-weighted and re-allocated on a periodically scale. The risk profile is high, due to investment in equities and Frontier Markets.
In principle, the fund will pay out dividend twice a year with an expected dividend yield of approximately 5% per annum.
To achieve its objective, the Fund invests 95% to 100% of its total assets through TCM Investment Funds Luxembourg in units of TCM Global Frontier High Dividend Equity (Lux). The Fund qualifies as feeder-structure.
TCM has entered into an agreement with Sustainalytics for the screening of the portfolios of the TCM equity funds on ESG criteria (UN Global Compact and Controversial Weapons).
The Fund Manager writes
During Q4, the fund rose 3.61%, outperforming the benchmark index which rose 3.53%. In 2019, the fund returned 7.74%, whereas the index rose 20.33%. The difference can be explained by the rally in Kuwait, where the stock market rose by 40%, measured in euro. The index has a weighting of 36% in the country, although the country doesn’t really have frontier markets characteristics, given the small population, high income and lack of a structural growth story and acute oil dependence. The upcoming promotion of Kuwait explains partly the rally over the last year. After the upgrade, the weightings of countries such as Vietnam, Morocco, Nigeria and Kenya will increase. In these countries the fund has a selection of attractive valued high-dividend shares. Emerging markets (EM) underperformed developed markets (DM) in 2019, but there are various signs that the tide is turning in 2020. In contrast to last year, the expected earnings growth is higher than last year and also higher than in DM. Macro data supports the Frontier & Emerging growth story. The IMF expects growth in these markets to accelerate from 3.9% to 4.6%, while growth in developed countries remains flat at 1.7%. An increasing growth differential is historically an important driver for outperformance of EM. The unexpectedly sustained easing monetary policy by the Fed as well as the expected tighter fiscal policy in the US will put some pressure on the dollar. A stable or weaker dollar is good for emerging countries because debt is mostly denominated in US dollars. In the light of these developments we don’t think it’s longer justified that Frontier markets trade at a discount of 50% (in terms of PE) compared to developed markets. TCM Global Frontier fund offers an excellent investment opportunity given the low historical drawdown and low correlation with developed markets. The portfolio is trading at 8.85 times earnings with a dividend yield of 7.09%. The fund currently has (equal weighted) positions in 72 shares across 23 different countries. The countries with the largest weightings are now Vietnam (10.27%), Nigeria (8.83%) and Kenya (8.67%). In these markets there are currently the most interesting high dividend shares that meet the quality requirements. The weighting of a country is therefore mainly determined by the relative attractiveness of the market compared to other countries. Consequently, the composition of the fund can differ significantly from the benchmark index.
No rights may be derived from this publication. You are referred to the prospectus and Key Investor Information Document for the fund's terms and conditions. These documents may be obtained from the website or the address mentioned below. The manager of the fund has obtained a licence for this fund from the Netherlands Authority for the Financial Markets in accordance with the provisions of the Financial Supervision.