London, UK, 9 November 2022

Edison issues update on Templeton Emerging Markets IT (TEM)

Templeton Emerging Markets Investment Trust (TEMIT) has experienced a difficult period of performance in recent quarters as investors have focused on the tough macroeconomic backdrop rather than on individual company fundamentals. However, managers Chetan Sehgal (lead manager) and Andrew Ness are confident in the long-term strategy of investing in companies with sustainable earnings power that are trading at a discount to their estimated intrinsic values. They believe emerging markets are under-owned and undervalued; hence, it is a compelling time to consider an allocation to the regions. The global asset allocation to emerging markets is 6.5% versus an 11.0% index weighting, which has declined by 40% over the last 10 years. Also, in aggregate, the valuation of emerging market shares is almost at a historic low discount to those in developed markets, while they are very inexpensive compared with their own history.

Investment trust discounts have generally widened this year in an environment of increased risk aversion. TEMIT is no exception as its 13.1% share price discount to cum-income NAV is wider than the 11.0% to 12.2% range of average discounts over the last one, three, five and 10 years. Given the positive relative growth prospects and attractive valuations of emerging compared with developed markets, global investors may benefit from an allocation to a large, well-established emerging market fund that has a clearly defined philosophy and investment approach, especially when investors return to focusing on companies with favourable fundamentals rather than trying to anticipate macroeconomic developments. 

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