ii view: high yielder Ashmore proud of positive performance

Shares in this specialist emerging markets fund manager fell 17% in 2022 but are up so far this year. Buy, sell, or hold?

Third-quarter trading update to 31 March

Chief executive Mark Coombs said:

"While volatility returned to capital markets in the quarter, driven primarily by the developed world as higher rates caused stresses in the banking system, emerging markets delivered positive performance.”

ii round-up:

Specialist emerging markets fund manager Ashmore Group (LSE:ASHM) today detailed a positive investment performance, with growth in third-quarter Assets Under Management (AUM) exactly in line with City forecasts. 

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Total AUM grew to $57.7 billion from the prior quarter’s $57.2 billion as investment gains of $1.6 billion outpaced net client outflows of $1.1 billion.   

Ashmore shares retreated marginally in UK trading having come into this latest news up around 3% year-to-date. M&G Ordinary Shares (LSE:MNG) are by around 5% in 2023 while shares for hedge fund manager Man Group (LSE:EMG) are down just over 1%. 

Ashmore invests in asset classes including sovereign and corporate debt, equities, and real estate across the emerging markets on behalf of its institutional and retail clients. 

Accompanying management comments pointed to cheap emerging market valuations, superior economic growth compared to developed markets and the potential for interest rate cuts as inflation had already started to fall. 

First-half results announced in early February detailed around £700 million of capital resources including £480 million of cash as at end of December, with the interim dividend unchanged at 4.8p per share. 

A fourth-quarter trading update is scheduled for 14 July followed by full-year results on 6 September. 

ii view:

Started in 1992, Ashmore today employs over 300 people. A constituent of the FTSE 250 index, the specialist emerging markets fund manager is headquartered in London. Most of its investments are made across the debt markets with around 10% in equities and under 3% in alternative assets.  

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For investors, the West’s strained relationship with China cannot be ignored, while last year's U-turn out of Russian assets following its invasion of Ukraine also underlines the generally higher risk and volatile nature of EM assets. Estimated future dividend cover of below one also sits under the three-year average of 1.3 times and raises some caution regarding the size of dividend in future.   

On the upside, hopes that US interest rates have almost peaked may ease economic headwinds, emerging economies should continue to grow faster than their developed counterparts, while previous cash held as opposed to debt offers some reassurance.   

For now, and while caution remains highly sensible, a historic and forecast future dividend yield of over 6% should at least keep more speculative income investors interested. 

Positives: 

• Positive Q3 investment performance
• Attractive dividend (not guaranteed) 

Negatives:

• Uncertain economic outlook
• Fee pressure from ETF funds

The average rating of stock market analysts:

Weak hold