60% of leading wealth managers polled at Portfolio Adviser’s Congress 2013 said they expect to up their weighting to emerging markets in the next 12 months. Just 11% said they would cut their exposure.
It is no secret that emerging markets have lagged in recent years – MSCI EM is flat over three years to 20 September, versus around 40% growth from the MSCI World, according to FE Analytics.
Speaking at the event, Daniel Tubbs, Mirabaud Asset Management’s head of global emerging markets, noted the “fall from grace” of the four biggest markets, which account for almost half of the total GEM space.
“Whether it is China, where they have been investing too much and not consuming enough, or Brazil and Russia where the opposite is true; or India with its plethora of structural issues; it has made it a lot harder for us as a fund management team to find ideas,” he said.
“We have had to look much more at the peripheral markets, and even go further afield to some of the more liquid frontier markets.”
Compared to the MSCI EM index, Tubbs’ Global Emerging Markets fund currently holds overweights in the likes of Colombia, Saudi Arabia, Singapore and Turkey, while being underweight India and Brazil. Consumer discretionary is the big overweight on a sector basis – consumer-facing tech firms Lenovo and Tencent are top 10 holdings.
In terms of China, 59% of wealth managers at the conference said they would – directly or indirectly – increase their exposure to China H-shares in the coming 12 months.
For his part, Tubbs asserted that while the developing world is trading on a big discount to developed markets, the wait is for a catalyst from China to get emerging markets to reflect their importance from a global macro and political perspective.
“What that catalyst will be is difficult to answer, but the root of it will be the biggest market, China. You have got to believe that China is going to fundamentally improve in order for there to be a positive knock-on impact across other emerging market countries and for the equities to catch up and for the valuation discount to narrow.”
GEM and global equity outflows have hit Aberdeen Asset Management’s funds under management.
