Charlotte Richards asks top managers how they are positioning their emerging markets funds in the current climate.
Emerging markets were far from immune from the financial crisis that crippled many developed economies.
Last October, due to escalating concerns in Europe and economic recovery in the US, the MSCI Emerging Markets index fell to a year-low of 824.39.
However, developing economies recovered at the start of this year, with investor sentiment surrounding the sector improving on the back of encouraging data from the US and the refinancing operations proposed by the European Central Bank.
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Sales into the IMA Global Emerging Market sector have been solid throughout the year. There have been positive flows in every month of the year so far.
The IMA stipulates funds in the Global Emerging Market sector must invest at least 80% of their assets in emerging market equities, as defined by the relevant FTSE or MSCI Global Emerging Markets index.
Emerging markets play an ever-increasing role in global economic growth. According to 2012 figures, Asia is expected to grow by 6.8% in 2013, while Latin America is predicted to grow by 3.6% over the same time period.
These figures are far better than in the UK, where the economy is expected to contract by 0.7% this year according to the OECD.
Also significant is the fact that global emerging markets are home to over 80% of the world’s population.
This is clearly an important sector and one investment advisers cannot afford to ignore. It is also a diverse region that is home to many different companies and sectors. So where are the best opportunities at the moment?
Where to look
For Kevin O’Hare, managing director and co-manager of the £14.64m Lazard Developing Markets fund, opportunities lie at a stock level rather than by country. The focus of his fund is to buy stocks that are positioned to grow their earnings over the long-term, but whose valuations do not reflect that growth.
The manager notes two specific stocks that have performed particularly well over the last 12 months.
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