Over the years they have got to know and understand the regions they invest in and have benefited from the growth in their own confidence as well as in that of equity issuance and sophistication in those markets as they have developed.
Emerging market equities are still a strong, solid long-term investment even though the story since the beginning of this year is less attractive – the benchmark index is down 7.5% while the flagship funds of all three luminaries are down 7.3%, 6.3% and 9.5% respectively.
As the equity/bond shift changes, in years from now, assuming a number of fair winds and continued global economic growth, a number of emerging market debt managers will surely join the big name ranks as the level of debt issuance rises as is flows into the increasing number of emerging market debt funds.
At the recent Portfolio Adviser Expert Investor in Edinburgh, Aberdeen Asset Management’s emerging market portfolio manager Kevin Daly demonstrated how in terms of market cap this market has risen exponentially since 2001, almost entirely on the back of local debt issuance.
In January 2002, corporate and sovereign debt market cap stood at round $£400bn and by the end of January 2011, the figure was hovering around the $2trn mark.
There was always going to be a lag between the availability of debt, particularly in local currencies, and the flows into funds but in 2010 a record $75.1bn was newly invested in emerging market debt funds. This has been a steadily increasing figure (with a notable exception in 2008), up from $34.5bn in 2006.
There are risks in emerging markets, across the asset classes, but for those looking at investing at a different point along the risk spectrum, emerging market debt may be the next long-term play.
