Patience is a virtue when it comes to EMs
Impatient investors should steer clear of emerging markets (EMs) as data from FE Analytics proves they’re really a long game, with funds in the asset class performing better over a 10-year timeline.
The 12 months to 30 November 2018 saw EMs take a hit with the sector average dropping to -3.84 per cent.
But, while that looks bad, the sector average was 8.12 per cent across three years, 5.71 per cent across five years and 7.02 per cent across 10 years, suggesting the investment suits someone with a longer-term perspective.
No stranger to EMs is fund manager Stewart Investors, who use Colonial First State as their distribution channel in Australia. Portfolio manager, Jack Nelson told Money Management that because the nature of the economies in EMs are such that any given year, a political crisis or currency weakness is likely to be affecting one country or another, you have to be in it for the long haul.
“Investors in emerging markets need to be able to ride these bumps with the knowledge that, over a long period of time, well-run companies in emerging markets benefiting from sustainable development have the potential to deliver attractive returns to patient equity holders,” said Nelson.
And the proof is in the pudding, with Stewart Investors’ Global Emerging Markets fund holding the top spot for the 10 years, five years and 12 months to 30 November, only faltering in the three-year time frame.
Going forward, Nelson said he was warily optimistic on the opportunities for attractive, risk-adjusted returns over the long-term, and he particularly liked India.
“We continue to find many high quality companies in India. The country has bred a large number of entrepreneurial family companies who have built impressive business franchises,” he said. “Some of these are globally competitive service companies, like in IT outsourcing, whilst others are leading domestic consumer brands. India is a market which offers a unique combination of a huge potential for growth plus a range of highly profitable and well-run companies for us to choose from.”
AUTHOR
Anastasia Santoreneos
Recommended for you
Pinnacle’s London affiliate, Life Cycle Investment Partners, has secured over $15 billion in FUM in its first year and achieved profitability, the firm’s fastest affiliate to do so.
For foreign fund managers looking to come to Australia, a financial services law firm has shared which regulatory option offers them the quickest pathway?
Betashares has partnered with a US fund manager to form a private capital division aimed at providing financial advisers and wholesale clients with private markets investments.
GQG Partners has lost over US$1 billion from an institutional client, contributing to FUM falling by US$6 billion in July, as it flags fund underperformance could lead to continued outflows.
