“For most of last year, and despite the strong investment performance, the discount remained stubbornly wide,” the board said in the annual results.
“We were, however, encouraged to see that the discount narrowed and remained stable from mid-December until the end of January. However, we were disappointed to see it come under pressure again in February and March as volatility returned to markets,” it continued.
The board failed to mention the widening of the discount coincided with Hardenberg’s (pictured) sudden exit, which was announced on 1 February. He remained at the asset manager until 31 March.
A month later, Mobius Capital Partners, the boutique firm founded by emerging markets pioneer Mark Mobius, announced Hardenberg was joining as a founding partner.
Temit shares have traded at discounts between 9.2% and 14.5% over the last financial year ended 31 March. The board has bought back 3.4% of shares over the period.
The current discount is 15%, according to the Association of Investment Companies.
Numis director for investment companies research Ewan Lovett-Turner said Hardenberg’s departure represented significant change and the resulting uncertainty was playing into the discount. Hardenberg has been replaced by Chetan Sehgal.
However, Lovett-Turner noted Temit’s closest peer, the JP Morgan Emerging Markets Investment Trust, was trading at a 14% discount. He said that indicated the change in management was not the sole factor playing into the investment trust’s share price.
“You have had volatility in that sector and that has hit discounts on the whole,” he said.
Temit shares have fallen 4.2% over the last six months, while its net asset value has increased 0.4%, according to Trustnet. The Investment Trusts Global Emerging Markets sector has fallen 0.7% over the period. Its share price outperformed the sector over longer periods, returning 8.4% over one year and 43.5% over three years, compared to 5.8% and 29.6% respectively among its peers.
Slashed fees
Stimulating demand was equally important for narrowing the discount, the board said.
They said Franklin Templeton had increased its marketing efforts on the investment trust, launching a website and social media presence.
The board also announced it has cut fees.
The current tiered AIFM fee drops from 1% to 0.85% at £2bn assets under management, but from July the threshold will drop to £1bn, according annual results published on Tuesday.
“Anything that reduces the expense ratio is positive,” Lovett-Turner said.
In April, Numis switched its recommendation in emerging markets from Temit to the JP Morgan investment trust, which is managed by Austin Forey.
Stifel has also recommended JP Morgan Emerging Markets, describing it as a stable alternative for investors who are concerned about uncertainty at Temit.
