The RWC Next Generation Emerging Markets Fund, which will be managed by RWC’s James Johnstone, is designed to offer access to emerging and frontier markets that are currently under-represented by current indices and funds.
Based off a strategy the group has been managing since 2014, Johnstone will invest in some 50-70 positions, with minimum market capitalisations of $750m, or daily dealing volumes of at least $2m.
The Luxembourg Sicav is expected to be available from 20 March and will offer exposure to sectors that RWC’s emerging and frontier markets team believe are well placed to benefit from investment themes including urbanisation.
“The MSCI Emerging Markets index is currently highly concentrated: 86% lies in eight countries, with the remaining 16 representing only 14%,” said Johnstone. “Likewise, within the MSCI Frontier Markets index we see economies which are largely under-owned but are now following the developmental pathways successfully followed by countries more traditionally referred to as ’emerging’.
“By investing in countries at an earlier stage of development versus large emerging markets – such as China, Brazil, India and Russia – we’re aiming to provide differentiated exposure to rapidly developing economies which also have low correlations to both developed markets and each other, resulting in a truly diversified range of companies and countries.”
Tord Stallvik, head of business development at RWC Partners, added: “Asset allocators are increasingly seeking genuine sources of diversification following a tumultuous year in which many asset classes performed poorly and correlations were high.
“Smaller emerging markets – those we consider to be the ‘next generation’ of emerging markets – provide an interesting solution for those wanting to diversify their equity exposure into countries and companies which are likely to be the future drivers of economic prosperity: the dynamics we see here are similar to those of larger emerging markets 15 years ago.”