IT HAS been a testing year for emerging market equities. While the S&P 500 has gained roughly 16 per cent year to date, the MSCI Emerging Markets index has fallen from over 1,080 at the beginning of the year to recent levels close to 1,000. But some see the tides turning.
Research by JP Morgan recently concluded that emerging market equities look cheap, and that “now looks like a good time to buy”. With this in mind, here are some of the funds that the experts are tipping.
“Caution is clearly advisable,” says Morningstar’s Chetan Modi, “but some funds which have struggled recently may now look attractive.” Aberdeen’s Emerging Market A fund, for example, has lost 0.63 per cent since this time last year, “but the clear, long-term focus on emerging market growth may see a stronger performance in the future,” says Modi. The Aberdeen fund, as well as First State’s Global Emerging Markets Leaders fund, has provided high returns over a five-year period – 117.36 and 131.16 per cent respectively.
“Stock-picking has paid off for some fund managers of late,” says Ayesha Akbar of Fidelity, “but we increasingly like funds focusing on broader macro themes,” she says. Akbar names the Eaton Vance Parametric Emerging Markets fund. It returned 3.55 per cent over the period of a year. With a lower asset allocation to consumer staples (8.71 per cent, compared to 14.6 in the Aberdeen fund), the Parametric fund also avoids what Akbar sees as a potentially overpriced sector at the moment.