VOYA EMERGING MARKETS HIGH DIVIDEND EQUITY FUND Commentary | 4Q22
Voya Emerging Markets High Dividend Equity Fund
Quantitative equity strategy with call writing seeks enhanced total return and downside capture
Strategy overview
Emerging markets equity strategy seeks to maximize total return and generate higher income than the reference index, using model-driven stock selection call options writing.
Performance
For the quarter, the Fund provided a total return of 11.62% on a net asset value basis, and a total return of 12.31% on a market price basis. The Fund's reference index, the MSCI Emerging Markets Index, returned 9.70%.
Equity portfolio
For the quarter ending December 31, 2022, the equity sleeve of the Fund outperformed its reference Index on a gross of fee basis. In terms of the Fund's performance for the quarter, the smaller market cap tilt and core model contributed the most to results. Strong performance in the core model was driven by the valuation indicator. The higher dividend yield contributed while active industry exposures were neutral.
On the sector level, stock selection within the financials and consumer staples sectors contributed to performance. The key contributors included not owning NIO Inc., overweight positions in Koc Holding A.S. and Hana Financial Group Inc. By contrast, stock selection in utilities sector detracted. Selection was negative in materials in addition to the underweight to the sector but this was partially offset by a positive allocation impact. On an individual stock level basis, overweight positions in Commercial Bank (Q.S.C.) and PT United Tractors Tbk and underweight to Ping An Insurance (Group) Company of China, Ltd. detracted the most from performance.
Option portfolio
The Fund's covered call strategy seeks to generate premiums and retain some potential for upside appreciation. This strategy detracted from returns during the period, as
the positive performance of the equity markets resulted in losses on the short call options. The Fund implemented this strategy by typically writing call options on the EEM exchange-traded fund (ETF). The strike prices of the options written were typically at or near the money, with expiration dates around one month at inception.
Outlook and current strategy
The Fund employs an actively managed emerging market (EM) equity strategy, designed to generate higher dividend income and total returns than the reference Index. The investment process creates a universe primarily constituted of stocks paying a dividend deemed to be sustainable and utilizes fundamentally driven sector-specific alpha models to identify the most attractive stocks within each sector. The portfolio is optimized to achieve its dividend and alpha objectives.
INVESTMENT MANAGEMENT
Commentary | 4Q22 | Voya Emerging Markets High Dividend Equity Fund |
Stocks and bonds finished a hard 2022 on a high note. The major stock Indexes overcame negative returns in December to end the fourth quarter with strong gains in what was otherwise an abysmal year. International stocks outperformed US equities; Europe and the UK led the way despite the challenges of the war in Ukraine and painfully high inflation. Importantly for emerging markets, the US dollar sold off hard from its September peak, releasing some of the pressure that had built up since the first half of 2021. The dollar weakness was welcome relief for non- dollar assets ― emerging market stocks rebounded with a 9.70% quarterly gain, as measured by the MSCI Emerging Markets Index.
Investors can be forgiven for wanting to put 2022 in the rearview mirror. High inflation, rate hikes, market volatility, the war in Ukraine and resurging Covid infections top the list of things we would like to move past. Will 2023 bring more troubles, or do investors have reasons for optimism? There is at least one reason
for optimism: The end of the global interest-rate hiking cycle may be in sight, letting markets focus more on economic fundamental factors. We believe prospects are improving for emerging markets, with China's zero-Covid policy challenges abating, a better inflation backdrop and fewer geopolitical and currency challenges from the United States.
Holdings detail
Companies mentioned in this report - percentage of portfolio investments, as of 12/31/22: NIO Inc. 0%, Koc Holding A.S. 0.36%, Hana Financial Group Inc. 0.63%, Commercial Bank (Q.S.C.) 0.31%, PT United Tractors Tbk 0.33% Ping An Insurance (Group) Company of China, Ltd. 0.56%; 0% indicates that the security
is no longer in the portfolio. Portfolio holdings are subject to change daily.
Disclaimer
The MSCI Emerging Markets (EM) Index captures large- and mid-cap representation across 24 emerging-market (EM) countries. With 1,387 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in each country. Investors cannot invest directly in an index.
Past performance is no guarantee of future results. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. All security transactions involve substantial risk of loss. The performance quoted represents past performance. Investment return and principal value of an investment will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.
Total investment return at market share price measures the change in the market value of your investment assuming reinvestment of dividends, capital gain distributions and return of capital distributions/allocations, if any, in accordance with the provisions of the Fund's dividend reinvestment plan. Total investment return at market share price is not annualized for periods less than one year. Closed-end funds like the Fund do not continuously offer shares for sale and are not required to buy shares back from investors upon request. Shares of closed-end funds trade on national stock exchanges. Therefore, market share prices are not directly affected by Fund expenses or fees, which ordinarily have the effect of lowering total return.
Total investment return at net asset value has been calculated assuming a purchase at net asset value at the beginning of the period and a sale at net asset value at the end of the period; and assumes reinvestment of dividends, capital gain distributions and return of capital distributions/allocations, if any, in accordance with the provisions of the dividend reinvestment plan. Net Asset Value is total assets less total liabilities divided by the number of shares outstanding. Net Asset Value is net of all fund expenses, including operating costs and management fees. Total investment return at net asset value is not annualized for periods less than one year.
Principal risks: All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. Price volatility, liquidity, and other risks that accompany an investment in equity securities of domestic and foreign companies, and small and mid-sized capitalized companies. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets.
Options risk: The Fund may purchase put and call options and may write (sell) put options and call options and is subject to Options Risk. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. Risks may also arise from an illiquid secondary market or from the inability of counter-parties to meet the terms of the contract. When an option is exercised or closed out, the Fund may be required to sell portfolio securities or to deliver portfolio securities to satisfy its obligations when it would not otherwise choose to do so, or the Fund may choose to sell portfolio securities to realize gains to offset the losses realized upon option exercise. Such sales or delivery would involve transaction costs borne by the Fund and may also result in realization of taxable capital gains, including short-term capital gains taxed at ordinary income tax rates, and may adversely impact the Fund's after-tax returns.
This Fund has additional risks that you should consider, such as market discount risk, investment and market risk, foreign investment and emerging markets risk, foreign (non-US) currency risk, Asia Pacific regional and country risk, issuer risk, equity risk, distribution risk, tax risk, dividend risk, small-cap and mid-cap company risk.
The strategy employs a quantitative investment process. The process is based on a collection of proprietary computer programs, or models, that calculate expected return rankings based on variables such as earnings growth prospects, valuation, and relative strength.
Data imprecision, software or other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems, which may negatively affect performance. Furthermore, there can be no assurance that the quantitative models used in managing the strategy will perform as anticipated or enable the strategy to achieve its objective.
This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities.
The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Fund holdings are fluid and are subject to daily change based on market conditions and other factors.
©2023 Voya Investments Distributor, LLC · 230 Park Ave, New York, NY 10169 · All rights reserved.
- 992-0180Individual Investors | (800) 334-3444 Investment Professionals CEF-COMM-IDE • 123122 • ex123123 • IM2755186
voyainvestments.com
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Voya Emerging Markets High Dividend Equity Fund published this content on 27 February 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 March 2023 10:04:03 UTC.
