The Best Fund To Profit From A Recovery Within Emerging Markets

Emerging market funds have been a hot asset class recently. Investors have been taking advantage of depressed valuations overseas, seeking to boost investment returns by gaining exposure to some of the world’s fastest growing economies.

One of the best ways to play this trend is via the Templeton Emerging Markets Inv Trust  (LSE:TEM), one of the biggest trusts in the emerging markets sector. 

Templeton Emerging Markets has been on the scene for the past 25 years, and over this time the trust has only had one investment manager, Mark Mobius, who still sits at the helm.

With only one manager in place since inception, Templeton has been free to carry out long-term investment strategies, lasting decades and Mr Mobius has been able to grasp a solid understand of emerging market trends and developments. Indeed, he has recently issued some sage advice on the current emerging market sell-off, stating that;

 “I think most long-term investors realise they need to think before they leap [out] since recoveries can come very fast and it can be difficult to get back in when the recovery comes.”

Trust fundamentals stock exchange

So, what are trust’s key figures? Well, the fund has an annual management charge of 1% and the total expense ratio comes in at approximately 1.31%. At present, the trust offers a dividend yield of 1.13%, offsetting the bulk of these fees. 

The current net asset value per share is 601p; based on the trust’s current price this indicates a discount to NAV of 7.4%.

 27% of the fund is invested within Hong Kong and China, 13% is invested within Brazilian market, 12% within India and 12% in Thailand. The remaining 36% is invested within various other emerging markets. 

The secret to success

The Templeton Emerging Markets Trust’s largest holding is Brilliance China Automotive Holdings, a play on China’s rapidly expanding middle class, as more of the country’s population are able to afford cars and motor vehicles. Brilliance accounts for just under 9% of the trust’s assets. 

Tata Consultancy Services, an India IT conglomerate, is the trust’s second largest holding, amounting to around 6% of assets. The next few holdings are banks and financial services companies, 27% of the fund’s assets are devoted to the financial services sector.  

However, also sitting within the trust’s top ten holdings is Unilever (LSE:ULVR) (NYSE: UL.US). Consumer goods giant Unilever is a great play on emerging markets, as the company has a focused emerging markets growth strategy and currently generates around 50% of sales from developing markets. 

Unilever’s sales within emerging markets sales expanded 6.6% during the first quarter of this year and management increased the group’s interest in Hindustan Unilever Limited, from 52.48%, to 67.28%, which should add to the company’s bottom line going forward. 

Management has also stated their commitment to increase Unilever’s presence within Africa over the next few years.

It helps to be diversified 

Templeton Emerging Markets Investment Trust is not just a great pick to ride the emerging markets recovery, it's also one of the shares we believe you should hold to protect your portfolio from a UK property bust.

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Rupert does not own any share mentioned within this article. The Motley Fool owns shares in Unilever.