EM funds outshine S&P ASX 200 index
Funds that invest the majority of their assets in equities from emerging market countries performed better than the S&P/ ASX 200 index over the past three years to May, 2017, according to Money Management’s analysis based on FE Analytics’ data.
The three top performers in the sector, according to FE Analytics, were BlackRock Global Enhanced Emerging Market, BT Institutional Global Emerging Markets Opportunities and Martin Currie Global Emerging Markets which returned 12.4 per cent, 10.98 per cent and 10.75 per cent, respectively.
The S&P ASX 200 index, which measures the performance of Australian listed stocks, returned 6.03 per cent over the same time, the data said.
Although emerging markets have been typically associated by investors with higher risk and volatility as they often face more country-specific challenges, the trend seems to have started to change.
Australian investors, who looked for new opportunities in emerging markets, seemed to have recognised the benefits emerging markets offer such as attractive valuations and portfolio diversification.
However, most of the investors would say that emerging markets should still be viewed on a case-by-case scenario as they were not a homogenous market.
Interestingly, FE Analytics’ data also found that the MSCI Emerging Market Index recorded lower annualised volatility (10.14) over the period of the last three years than the S&P ASX 200 index (12.59).
Additionally, only less than five per cent of all funds that invested the majority of their assets in the emerging markets, and which were examined by FE Analytics, recorded volatility higher than the S&P ASX 200.
At the same time, only 17.7 per cent of funds looking for opportunities in the emerging markets managed to outperform the MSCI Emerging Market Index and 50 per cent of them were more volatile than the index.
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