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.”
Recommended for you
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
