In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what not to buy.
This week the interviewee was Charles Jillings, fund manager of investment trust Utilico Emerging Markets with a 3 -star Morningstar rating (UEM).
Which Sector Shows the Greatest Promise in 2022?
Tourism, there is demand built from two summer delays that are expected to remain strong from weddings to holidays. This should result in the airport seeing a lot of demand for most of 2022 – the question is, can it meet the demand? At UEM, we have increased our holdings at the airport with the expectation that passenger numbers will rise above pre-pandemic levels. In the top 30 stocks is GAP which is seeing an increase in demand. Asia needs China to restart international travel. After the increase seen in other markets will also be seen in China.
What Are Today’s Biggest Economic Risks?
Complete work. It’s great to see high job creation and low unemployment. This huge positive is likely to be driven by wage inflation and as a result continued pressure for higher interest rates. Of course, events in Ukraine are very much about it on many levels. And obviously tragic to watch. The main concern for us is the ability for Russia to export gas to Europe. The shortcomings that will ensue will lead to the limitations of the European economy and push Europe into an inevitable recession.
Furthermore, food security and dwindling grain supplies from Ukraine and Russia will also cause some countries to be challenged in meeting their basic needs. Finally, China is struggling with two opposing outcomes: limiting Covid and stimulating the economy. The zero Covid policy has and will continue to damage the economy because the Covid policy first. The interaction of all of the above is a challenging investment prospect as they individually and collectively undermine the global recovery.
Explain Your Investment Strategy
We are long-term investors looking for a good business, a good management team and an acceptable operating environment. We focus on Utilities, Infrastructure and Communications. We invest in emerging markets. Over 90% of our portfolio is registered and over 95% operational. We want to be able to see management’s ability to unlock business opportunities in the assets they manage. Most businesses have strong cash flow and pay dividends. In turn, UEM can pay dividends to its shareholders. We are bottom-up investors looking for compelling investments.
Which famous investor do you like?
Warren Buffett – he clearly identified the right time and the right price to buy a business! Then they hold most of them for longer periods of time, allowing their power to drive cash flow and returns to shareholders.
Mention Favorites “Shares Forever”
Alupar. This is a family -run Brazilian transmission business – they have shown the ability to run concessions well while increasing capacity with good returns. This ability to run a business does not depend on volume, but “availability” combined with incredible capital expansion.
Why Don’t You Invest?
Something that requires a lot of funding from shareholders over time to understand the value combined with significant risk, is very difficult for us. We will find investing in a landbank and facing the risks of planning, development and then operating the assets as a big challenge. We hired the management team again to expand our existing asset base.
Growth or Value?
Either way, while our portfolio is based on value, I don’t need to be one or the other. The main question is whether the opportunity is attractive in a set of metrics. That said much of our portfolio at UEM is bottoming up, value driven. We are more focused on the resilience of the portfolio and the ability to generate returns over the long term.
Home or Retirement?
First of all, this is an efficient driver and the ability to use it and the fact of earning free profits means it is a first investment for many. Retire next. We all need to save to meet our needs in the long run. And pensions are driving long -term capital for that purpose.
What Are Your Thoughts on Crypto?
not. This is a new asset class that is finding its feet. It will be volatile and have a confidence test. I suspect over time it will cause a lower friction global economy that is accelerated by the speed of transfer.
What can be done to increase diversity in fund management?
I think a lot is happening for the good here. We as an industry must keep up with the necessary changes. Having parameters that encourage results here helps. I have no doubt this will lead to more diversity over time. At UEM, we are very happy to have two very capable female board members.
Have You Ever Joined a Company and Been Proud (or Disappointed) in the Results?
We regularly engage with portfolio companies on a number of levels. From encouraging expansion to dividend payments.
What’s the Best Advice You’ve Ever Been Given?
If it’s too good, it must be wrong. If you are offered an opportunity to make a profit, it is often impossible to deliver. That said, the market conditions are very often offering significant long-term results in investments made in times of weakness.
What Would You Be If You Were Not a Fund Manager?
Architect. I always admire the inspiration actually led to the excellent design and purpose of the building. I will find the process and accomplishments really worthwhile.
