Ashmore To Launch Luxembourg Emerging Markets Fund

by Carla Johnson, Investors Offshore, London

26 February 2003

Ashmore Investment Management is launching a Luxembourg version of its highly successful Guernsey-based Emerging Markets Liquid Investment Portfolio (EMLIP), which has returned more than 19% a year since its inception in 1992.

The new fund, using a Sicav structure, will appeal to Continental investors, says Ashmore, but cautions that this type of investment is definitely for the long term. Emerging markets have indeed been a highly volatile investment sector, with the Russian collapse in 1998 being just one of the gut-wrenching events to have whitened the hair of many a fund manager in the last 15 years. Ashmore says that its edge comes from superior country risk analysis; and developed markets have shown just as much volatility as emerging ones in the last few years. Ask any high-tech aficionado.

The Luxembourg Ashmore Emerging Market Debt fund has been launched with an initial size of 28 million euros. There is a minimum initial investment of 1m euros or $1m for institutional investors and 5,000 euros or $5,000 for private investors.

Ashmore describes itself as a specialist emerging markets fund manager. Formerly part of the Australia and New Zealand Banking Group, it is now majority-owned by the people who work for it following an MBO in February 1999. The business was started by current team members in 1992 with US$18 million under management and now manages in excess of US$1.6 billion of assets split approximately 51% open-ended, 25% closed-ended and 24% segregated accounts. There is a further US$1.7 billion of assets under administration in Ashmore's Guernsey company, International Administration (Guernsey) Limited.

Standard & Poor's Fund Services give Ashmore's emerging markets fund an AAA rating: "the fund demonstrates the highest standards of quality in its sector based on its investment process and management's consistency of performance as compared to funds with similar objectives."

Domestic European hedge funds targeting European investors are often based in offshore centres such as the Cayman Islands, British Virgin Islands or Bermuda, but until recently were usually listed in Dublin rather than Luxembourg, because the Irish offshore centre has less stringent authorisation. However, Luxembourg is easing its regulatory regime for hedge funds and venture capital funds.

Luxembourg has increasingly been the choice of US mutual funds looking for a European base, and the new legislation may equip Luxembourg to carve out a substantial slice of the rapidly growing European market for retail hedge funds.

Recently, Luxembourg also adopted the new UCITS (Undertakings for Collective Investment in Transferable Securities) directives (UCITS III). The country's fund managers' association said the move was evidence of Luxembourg’s “determination to always offer one of the most modern regulatory and tax environments to this important sector of the national economy.” Fund assets domiciled in Luxembourg add up to nearly US$1 trillion.

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