Mark Mobius is relinquishing command of the Templeton Emerging Markets Investment Trust after a period of poor performance, while Jason Pidcock has resigned from the £4bn Newton Asian Income Fund to take on a role at Jupiter.
On the product side, established emerging markets player First State has launched two funds – Asia Focus and Asia All Cap – for its newly formed Stewart Asia arm. Old Mutual Global Investors has converted its Asian Equity into an income fund, Seven IM has launched the ‘smart passive’ EM Value
Fund, while Liontrust will focus on long/ short emerging markets opportunities with its new GF Global Strategy Equity Fund.
Patrick Cadell, lead manager on the latter, stresses that while the broad emerging markets index has gone nowhere during the past three to five years, there have been segments of the market that have performed very well just as there have been parts that have done very badly.
He says there has been a huge divergence within the asset class, not seen before 2008.
Cadell sees Chinese market volatility – a dislocation driven by liquidity bubbles – as hitting all stocks with the same force, therefore creating attractive opportunities on the long side (in H-Shares) once the panic subsides.
He also likes India, where big structural reforms due to pass in the next few months – a general sales tax and land acquisitions bill – will provide a substantial boost to the economy.
He says: “There are some really good opportunities in mid-cap names. Taking a value bias means there is a big differentiation from a lot of the high-quality growth names which were in the likes of Aberdeen and First State’s GEM funds. We don’t focus so much on the overvalued consumer names, which have been the generic play for a lot of emerging market investors on astronomical multiples.”
In the shadow of giants
The phenomenally popular multibillion pound First State and Aberdeen global emerging market franchises cast a huge shadow over the retail space – not that they are particularly bad funds but rather they have dominated investors’ choices for several years, despite now being soft closed to new investment.
For Laith Khalaf, senior analyst at Hargreaves Lansdown, there is an overarching number of quality managers in the emerging markets area that have been around for some time.
But that, he says, is probably what makes them as good as they are.
“There is a good establishment in this area and maybe it is time for a new generation to come through, but I am not sure we are seeing it as such. The big First State and Aberdeen teams have probably sucked in a lot of talent,” he says.
“For us, it takes time to build up a track record and credibility of seven years or more and it is difficult to establish those credentials, as you have to produce good performance over a long time period.”
A trend Khalaf is seeing is a move towards more income-focused strategies, such as the Old Mutual fund’s change of remit discussed earlier, as well as Juptier’s move for Pidcock.
