Ashmore suffers net outflows of £3.6bn as investors remain underweight emerging markets

More than 60% of the firm’s portfolios beat their benchmarks over 12 months

Are regional emerging market funds making a comeback?

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Emerging market specialist Ashmore saw net outflows of $4.5bn (£3.6bn) over six months to the end of December 2023, according to its latest half-yearly results, despite positive performance contributing $2.6bn of assets under management (AUM).  

Net flows and investment performance both ticked up during Q2 relative to Q1, but adjusted net revenue fell by 13% to £93.4m. The firm said this was the result of a 10% lower average AUM and “reduced FX gains”, although higher performance fees added £8m to assets. Adjusted operating costs also increased by 13% compared to the same period in 2022, with fixed costs increasing by 8% compared to H1 2022, and by 2% between Q1 and Q2 alone.

Pre-tax profit increased by 38% year-on-year, however, to £74.5m.

In terms of performance, 61% of Ashmore’s assets outperformed their benchmarks over the last year and 56% outperformed over three years. Some 62% of investor capital held with Ashmore beat benchmarks over five years.

The firm added that emerging market indices also performed well over the six months, with investors’ current underweight levels to the asset class representing a “meaningful opportunity to increase institutional and retail allocations”. 

Looking ahead, Ashmore believes emerging market GDP growth will outpace that of the developed world by more than three times, with “all regions delivering superior growth”. It pointed out that inflation challenges have been tackled across the piste, with many central banks beginning to cut rates. Meanwhile, it said a weaker US dollar due to the end of the US Federal Reserve’s tightening cycle will also likely bolster emerging market returns.  

Mark Coombs, chief executive officer of Ashmore Group, said: “Emerging markets have continued to perform strongly over the six months, and the factors driving this performance – superior growth, effective monetary policies and a weaker US dollar as the Fed reaches the end of its tightening cycle – look set to underpin further increases in asset prices in 2024.

“Although there are risks, particularly geopolitical ones in a year of many elections around the world and continued growth headwinds in China, there is a compelling argument for a shift in asset allocations from heavily indebted and relatively expensive developed markets to the emerging markets where many of the economies are sound, fiscal and monetary policies are sensible, and absolute and relative valuations are attractive.”

He added: “Ashmore continues to deliver outperformance for clients across a broad range of strategies and is well positioned to capitalise on increasing capital flows as investors recognise the superior risk-adjusted returns available in emerging markets.”

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