The latest data from the Investment Management Association shows retail investors shunning emerging market equity funds as pressures increase on these economies.
The IMA Global Emerging Markets sector saw net retail outflows of more than half a million pounds (£642,000) in August, the first month of outflows so far this year.
Year-to-date to October 11, the sector has also lost 0.71 per cent, according to FE Analytics. There have been several well performing emerging market funds, however. The top fund in the sector year-to-date, Hermes Global Emerging Markets, has delivered 9.96 per cent, significantly more than the MSCI Emerging Markets index at 0.11 per cent.
The £206.1m fund, managed by Gary Greenberg and his deputy Samir Patel, invests in companies with an emerging market bias. The fund currently has a 10.41 per cent overweight position in China, relative to the MSCI Emerging Markets index.
Closely following this fund at the top of the table is the £91m Standard Life Investments Global Emerging Markets Equity fund, which returned 8.59 per cent in the same period, and the company’s Global Emerging Market Equity Income fund, which delivered 8.29 per cent.
In contrast, the Templeton Global Emerging Markets fund, managed by veteran investor Mark Mobius, sits at the bottom of the table based on year-to-date performance, having lost 9.94 per cent.
Delivering the best performance on a five-year basis to October 11 is the Aberdeen Global Emerging Markets Smaller Companies fund with a 214.46 per cent return, followed by the JPM Emerging Markets Small Cap fund at 192.49 per cent. The past two decades have seen a marked shift in the emerging markets, with once uber-risky regions now standing tall as global growth engines.
In spite of this, Luca Paolini, chief strategist at Pictet Asset Management warns that emerging market asset classes are much more volatile than in developed markets.
He says: “While there are a clutch of countries that appear close to joining the ranks of advanced economies, large parts of the emerging world continue to suffer from a lack of economic diversification, insufficient financial market sophistication and weak governance.”
Mr Paolini’s colleague Patrick Zweifel, chief economist at Pictet Asset Management, adds: “While emerging markets have grown faster than developed countries, their growth and inflation rates have been more volatile, by a factor of roughly 1.5 and three respectively in the past decade.
“But this is not to say every emerging market will struggle to shed the ‘emerging’ label – rather, investors should pay closer attention to countries making progress in the areas that matter most.”
Jenny Lowe is features editor at Investment Adviser
THE NEXT 12 MONTHS
A survey carried out by Schroders reveals:
15%
of advisers expect emerging market equities to perform well
72%
of advisers are currently neutral or underweight the asset class in client portfolios
51%
of advisers expect to increase to emerging market equities in the next 6 months
