ING Investment Management has launched a new Luxembourg-domiciled fund which will invest in high dividend-paying stocks in emerging markets.

The fund is aiming to deliver a dividend yield which is at least 1 per cent higher than the MSCI Emerging Markets index via a strategy which ING says will seek to avoid the pitfalls of passively investing in the highest yielding stocks, such as dividend traps or sector biases.

The company is of the view that the case for investing in emerging markets has never been stronger, and it notes that according to the World Bank the eight largest emerging markets now contribute more to global growth than the European Union, Japan and the US combined. Furthermore, as ING points out, domestic demand is becoming relatively more important than traditional export growth drivers.

“Emerging market equities show almost double the earnings growth of developed markets - with lower valuations. Greater sales growth, stronger balance sheets and cheaper valuations underpin potential for outperformance while higher dividend growth rates in emerging markets in the last decade are evidence of improving alignment with shareholders,” said Manu Vandenbulck, senior investment manager and lead manager of the Emerging Market High Dividend fund.

According to the firm’s figures, the average dividend yield across emerging markets stocks is 3.1 per cent, compared to 2.2 per cent for those in the US and 2.4 per cent for Japanese companies.

Also running the fund will be Nicolas Simar, head of the high dividend team at ING.