Utilico Emerging Markets Trust (LSE: UEM) has reported a 1.6% decline in its net asset value (NAV) for the month of May, according to the latest monthly factsheet published by the investment trust. The drop brings the trust's NAV per share to 218.2p, down from 221.7p at the end of April. The decline reflects a challenging period for emerging market equities, which came under pressure from a strengthening US dollar, persistent inflation in several developing economies, and renewed concerns about China's economic recovery.
The trust, which invests primarily in infrastructure and utility companies across emerging markets, has seen its share price also fall in sympathy, trading at a discount of approximately 12% to NAV as of late May. This discount has widened from around 10% at the start of the year, indicating waning investor sentiment towards the asset class. The FTSE Emerging Index fell roughly 2.1% over the same period, suggesting the trust's diversified portfolio provided some relative resilience.
Analysts at broker Peel Hunt noted that emerging market infrastructure trusts have been caught between higher borrowing costs in local currencies and a strong dollar, which squeezes returns for UK-based investors. 'The sector remains out of favour, but the underlying assets are often inflation-linked, which may offer a buffer if EM currencies stabilise,' they commented. The trust's largest country exposures include Brazil, India, and Chile, where utility regulation and currency volatility remain key risks.
For UK investors and pension holders, the trust's performance is a reminder of the risks tied to emerging market allocations, which can amplify portfolio volatility. Many UK pension funds hold stakes in such trusts for diversification and yield, but the current environment of elevated global interest rates has made EM assets less attractive. The trust's dividend yield remains around 4.5%, supported by its portfolio of essential services companies, though the NAV erosion could pressure future payouts if it persists.
Looking ahead, the trust's board has reiterated its long-term focus on infrastructure assets with regulated or contracted revenue streams. However, near-term headwinds from currency movements and global monetary policy are expected to persist. The trust's next quarterly update is due in July, and investors will be watching for any change in the discount level or portfolio adjustments.
Source: Utilico Emerging Markets Trust monthly factsheet