Companies in places such as Africa and Asia, including India, are expected to significantly expand over the next five to 10 years, according to global fund manager, Henderson Global Investors.
The fund manager said it was because emerging economies and their populations were growing much faster than the developed world and already housed 86 per cent of the population.
Henderson Global Investors’ head of emerging market equities, Glen Finegan said: “Really the entire world’s future population growth, which we are told is going to reach nine billion [by 2050], is going to happen in emerging markets. Absolutely anyone looking to build a global portfolio should consider some allocation to emerging markets”.
It did not make sense that global investors ignored six billion of seven billion people in the world, he said.
Despite the volatility in the asset class from weak currencies and falling commodity prices, his team found some stellar outperformers, but had to weed out quite a lot of companies that were not up to their ESG standards, Finegan said.
“Our whole approach is to take a risk aware approach to what we accept is a risky asset class and just focus on trying to identify individual’s integrity, businesses with strong franchises, and long track records of managing all of the macro ups and downs”.
The fund invested in companies that were broadly exposed to improving living standards, companies that were building supermarket chains across Africa such as Shoprite, companies that sold branded consumer goods in China, mobile phone data and 4G networks in Indonesia and India.
Such companies represented long-term, demographically driven growth opportunities, he said.
“In terms of fund positioning we’ve benefited from large holdings in Brazil, which we increased when it was very unpopular last year. We’ve seen a strong rally in Brazil this year and some of those valuations are getting a little bit closer to fair”.
“We don’t have any exposure to Indian consumer companies, as we find valuations just astronomically high. We will wait and if we are fortunate enough to get an opportunity to buy good quality consumer companies at lower prices, we will”.
Henderson just launched their new emerging markets fund, however, year —to-date, the best performing funds in the class were with Wholesale plus, Lazard, OnePath and Colonial First State (CFS), based on Money Management’s Investment Centre (MMIC).
Meanwhile, over the longer term, (10 years), CFS, OnePath and Aberdeen stood out at top performers.
