Lazard Fund Managers has launched an emerging markets fund that pledges to exceed benchmark returns with 20% to 30% lower risk.
Susanne Willumsen (pictured) and Paul Moghtader will manage the Lazard Emerging Markets Managed Volatility fund with support from the wider £16.2bn quantitative equity team using a multi-factor investment process, which will factor in ESG considerations.
“Low volatility and emerging market equities are words that are rarely grouped in the same sentence,” said Willumsen. “The terms, however, are not mutually exclusive. We believe investors stand to benefit from a low-volatility allocation in emerging markets as it can result in more diversified economic exposures, the avoidance of market concentration risk and the diversification of holdings from a market cap-weighted benchmark.”
The Irish-domiciled fund is available in the UK, Ireland and Switzerland.
Most low volatility EM funds sit in the passive space
Willis Owen head of personal investing Adrian Lowcock said most low volatility emerging market funds sit in the passive space.
“The idea of low volatility EM funds are not new but they largely sit in the ETF area of the market as they can be easily and cheaply manufactured to adhere to whatever quants criteria you need,” Lowcock said. “There is also an MSCI Emerging Markets minimum volatility index for funds and ETFs to track or copy.”
For example, the $5.4bn iShares Edge MSCI Min Vol Emerging Markets ETF tracks the MSCI Emerging Markets Minimum Volatility Index for 0.25%.
Lowcock thought the fund had the potential to be popular given risk is one of the reasons some investors avoid emerging markets. But he said volatility and risk are part of the characteristics of the asset class and a factor in long-term performance.
He added: “It is also worth remembering that volatility can change over time, a look back to 2017 is a good example – that year markets were very calm and volatility almost non-existent but it returned quickly in 2018 to many investors surprise. Obviously the process will look at many factors to predict volatility but getting it wrong would likely impact returns.”
