Emerging markets product specialist Atlas Capital Management is set to launch a listed investment company (LIC) that offers investors exposure to a blend of Chinese and Indian large-cap stocks.
The LIC, Greater Asia Investments, has a five-year term after which shareholders will vote to wind up the company and have capital returned at net tangible assets, Atlas managing director John Pereira said.
The investment will also offer 7 per cent half-yearly distributions and shareholders will be given free options that are exercisable at a discount to the initial public offering (IPO) price.
"This is a game changing strategy for the LIC sector. These measures should bridge the current discount gap between NTA and share price currently experienced by the sector," Pereira said.
Greater Asia's IPO aims to raise $70 million and would invest the money in the IOF Dragon Peacock Fund, a product run by British insurer Prudential Plc's asset management arm.
The fund has delivered annualised returns of 19.29 per cent after fees in US dollar terms since June 2006.
Greater Asia has already received a recommended rating from Aegis and has been placed on BT SuperWrap.
Pereira argues that Chinese and Indian equities should be a separate allocation to broader emerging markets funds within investors' portfolios, as they are the world's fastest-growing major economies.
"Between them they have over 2.4 billion people and their middle class population is increasing dramatically. People are becoming wealthier and there are some very long-term growth stories in sectors like financials and infrastructure," he said.
"China and India have a low correlation with each other as investments because neither market is dependent on the other, adding to the diversification benefit for investors."
Greater Asia's IPO closes on 28 April, with listing on the Australian Securities Exchange set for 5 May.
