Templeton Emerging Markets Investment Trust has increased its revolving loan facility due to its positive outlook for the asset class despite a rising US dollar and Donald Trump’s trade war raising concerns for emerging markets.
The £2.3bn investment trust can now borrow £220m total, compared to £150m previously, including £44m in Chinese renminbi, where previously it could only draw on £30m.
It can also borrow in sterling and US dollars.
Board chairman Paul Manduca said the investment manager has discretion to draw down the debt as opportunities arise.
Manduca said: “While the board and the investment manager recognise that gearing increases volatility, after careful consideration, we have concluded that it may be in shareholders’ interests to increase the company’s borrowing facility at a time when the long-term outlook for emerging markets remains positive and interest rates are low.”
Gearing would hit 10% if all of the facility were to be drawn down based on net asset value at 31 August, according to a regulatory filing published on Monday. The investment trust currently has 8% gearing, according to the Association of Investment Companies.
The investment policy of the trust does not allow gearing beyond 10%.
Temit has this year suffered the departure of veteran emerging markets investor Mark Mobius and his protege Carlos Hardenberg. Chetan Sehgal replaced Hardenberg in Q1, while Andrew Ness will join in September as a UK-based member of the trust’s investment management team.
Fund selector demand for emerging markets dropped dramatically this year.
