More global managers eye emerging markets

There has been a growing trend for global equities large cap managers to increase their exposure to developing economies but specialist emerging market managers are still likely to deliver better results in that sector, according to Lonsec's Global Emerging Markets sector review.

Global managers are looking to gain exposure to growing companies in markets with forward momentum, but specialist managers with dedicated resources and tailored investment approaches may still deliver superior outcomes in emerging markets, Lonsec stated.

Lonsec's highest rated managers in this sector tend to be singularly focused on the asset class rather than investing as a bolt on approach to another strategy, said Lonsec senior investment analyst Steve Sweeney. 

 The only two funds to receive the highly recommended rating were the Aberdeen Emerging Opportunities Fund and the T Rowe Price Asia Ex-Japan Equity Fund.

There has also been an increase in the number of funds using the MSCI All Country World Index over the MSCI World Index as the fund's benchmark, according to the review.

"Despite the growing global awareness of emerging markets as a source of potential return, this sector remains a more inefficient research pool than developed markets, particularly for those managers comfortable investing in the less heavily researched mid cap stocks," Lonsec stated.

"This gives fundamental, active managers with well formulated investment research processes a greater opportunity to exploit insights gained from direct company contact and the research effort in general," Sweeney said.

"Emerging market investors paying active fees should be more willing to afford active managers greater freedom in portfolio construction to add insight and ultimately, alpha," he said.