Of course there are those that have made a lot of money investing in EM equities, there are also those who have not.
So far, the decoupling that was tipped to take place between developed markets and emerging markets has yet to occur and market performance in these regions is yet to reconcile with their impressive GDP growth, making stock-picking all the more important out there.
Similarly, the argument that EMD is the new safe haven will take some time to fulfil.
Still, there’s nothing quite like the most-exciting-thing-since-sliced-bread phenomenon that inevitably ensues when the big fund houses tap into another way to amass assets.
The early birds
To be fair to long-established emerging market players, they have true-to-form been ahead of the curve on this one.
Aberdeen Asset Management’s head of EMD Brett Diment joined the company in 1991 and its Select Emerging Markets Bond Fund was launched in 2001, reaching £1.6bn in AUM by the end of March this year.
The fund had a bad year in 2008 losing 26.15%, compared to the benchmark’s 12.03% loss, but recovered in 2009 and 2010 to significantly outperform the benchmark. Although it was below benchmark in 2011, it still made positive returns and so far this year it has returned 6.3% versus a 4.2% from the benchmark.
Since launch the fund has returned an annualised 12.74% compared to 10.65% from the benchmark.
Another big EM player First State took longer to get in on the act, but went in all guns blazing when it eventually did.
In August 2011 it poached Helene Williamson, who had been heading the EMD team at F&C for 15 years and ran the F&C Emerging Markets Bond Fund from January 2006, with an impressive five-year return of 50%+.
She has since been building up her new team with three recruits made in October last year and the first fund launched shortly after.
The stragglers
As with their EM equity offerings, where Aberdeen and First State go, others will follow.
Just in the past few weeks we have seen BlackRock poach BNP Paribas’ whole EMD team, while Threadneedle’s head of EMD and two of his colleagues resigned and subsequently turned up at Standard Life Investments.
Then yesterday Schroders announced it was hiring four new investment professionals to focus on the EMD relative return space.
In addition, Barings announced the appointment of a head of Asian debt and JP Morgan Asset Management hired former Aberdeen head of fixed income EMEA to develop its business, product design and client management in the region.
Next up, expect to see an onslaught of new products managed by the specialists that have been moving around in the past month or two.
What remains to be seen is whether fund management houses not known for their EM successes can do better on the fixed income side of the coin.
An alternative scenario is that it turns out to be another asset class dominated by one or two experienced outfits in the region (Aberdeen and First State).
Let me know what you think is the most likely below…
