JPMorgan unveils UK's first Brazil investment trust
The arrival of JPMorgan Brazil Investment Trust will give investors focused exposure to the country in the form of an investment trust for the first time.
An initial £50 million is being raised for the London-listed trust. The offer period is expected to start this week.
"Brazil is a very exciting investment opportunity and since it achieved investment grade in April 2008 it has transformed from inflationary boom-bust cycles. 2009 stress-tested this when the country experienced a normal recession with a swift recovery," says Sebastian Luparia, who will jointly manage the trust with Luis Carrillo.
"The investment opportunities we are finding in the region are focused on the domestic growth of the economy and we are selecting opportunities with a two to three year investment horizon so as to capitalise on investing in this growth."
The trust will hold between 25 and 50 holdings and be benchmarked against the MSCI Brazil 10/40 index.
According to JPMorgan, the South American nation is widely tipped as the growth story of 2010 but historically investment has been lower than in other emerging markets.
The firm says the more stable business cycle, lower interest rates and 2014 World Cup and 2016 Olympics should boost productivity and growth in Brazil.
Investors that subscribe to the ordinary shares at launch will be offered a bonus issue of subscription shares, on a one for five basis. Investors can register at jpmbrazil.co.uk to receive further information when available.
Up until now investors looking for Brazil exposure in an investment trust would have had to invest through an emerging markets trust or in BlackRock Latin American.
JPMorgan manages three other single country investment trusts: Russia, India and China. In addition to Brazil, it also enjoys a monopoly with its Russia and China trusts.
However, Fidelity will soon be elbowing its way into the China sector with Anthony Bolton’s hotly-anticipated investment trust.
The trust’s offer period is open until 5 April. For more information, go to idelity.co.uk.
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.