Fitzgerald, who runs the Aviva Investors fund of funds book alongside Ian Aylward, said the team undertook research into the sector earlier this year and was surprised to reveal how scarce top GEM fund managers were.
Currently his is invested in Aberdeen Emerging Markets, but said he took the decision not to up holdings in the fund after it soft closed in April this year.
Read our piece on top alternatives to Aberdeen in GEM.
Recently, in fact, he has reduced holdings in Aberdeen EM and upped his holdings in Matthew Dobbs’ Schroder Asia Pacific Fund.
The team has also been researching opportunities in eastern Europe and Latin America and has narrowed its selection down to three emerging Europe managers.
Fitzgerald said he is not as keen on Latin America at the moment, however, on the basis that it is too dear.
“When you think that GEM funds have to cover Asia, eastern Europe, parts of Africa and Latin America, it makes sense to us to have a specialist in each region. This becomes more important as the regions make up an increasingly large percentage of portfolios.
“We are overweight Asia and emerging markets within the cautious portfolio, with 10% of our holdings in these regions.”
Elsewhere in the portfolio, Fitzgerald has changed his view on developed Europe too. He added a position to small- and mid-cap companies in the region through the Baring Europe Select Trust run by Nicholas Williams and is now overweight Europe.
“Valuations in Europe are more attractive and the potential upside is greater than the potential downside. There is also a lower probability of the worst happening.”
Meanwhile in the US he has dropped the UBS US Growth Fund after it was announced manager Lawrence Kemp was leaving. He has moved this allocation into BlackRock’s North America Tracker, which he already had a holding in because he feels the US market is tough for many managers to beat.
