If
you want emerging market funds to add some worldwide flair to your
investments, read This is Money's experts' recommendations.
They
have picked funds and investment trusts to use as starting points for
what will hopefully be a successful income investing career.
Of
course, which fund is best for you depends hugely on your individual
circumstances and what investing story you think will unfold. So, always
do your own research, choose your investments carefully and hopefully
you will make your own good investing luck.
Riding the waves: Rapid growth in emerging
markets nations, such as Brazil, has delivered high returns - but
investors must prepare for a rocky ride
How to use our fund and investment trust ideas
This is Money asks our experts to suggest investments for a variety of investors.
These are people with a long history in the investment field and looking at their choices gives you some vital pointers to the world of investing.
But remember, these are just suggestions and whether a particular fund is right for you is your own decision and requires deeper research.
Their tips are suitable for investors opting to use an Isa wrapper or not. Go to the bottom of the page to find out why we recommend investing through an Isa.
Read the tips, follow the links to the funds' performance and read This is Money's Investing Section to gather ideas. If you have any doubts, talk to an IFA [find an adviser].
These are people with a long history in the investment field and looking at their choices gives you some vital pointers to the world of investing.
But remember, these are just suggestions and whether a particular fund is right for you is your own decision and requires deeper research.
Their tips are suitable for investors opting to use an Isa wrapper or not. Go to the bottom of the page to find out why we recommend investing through an Isa.
Read the tips, follow the links to the funds' performance and read This is Money's Investing Section to gather ideas. If you have any doubts, talk to an IFA [find an adviser].
Why emerging markets?
Emerging markets is a broad
term. It can cover everything from big hitting China and Brazil, to
up-and-coming Indonesia and onto the new investing frontiers of Africa.
The lure for investors is
greater growth and younger economies than typically found in the
developed West and emerging markets have delivered strongly on this over
the past decade.
The trade-off for this growth
is higher volatility and more risk.Emerging markets investments tend to
get punished in the short-term when turbulent times hit, in the long-run
though they are tipped to outperform.
Many investors consider
emerging markets funds an essential part of their portfolio, but experts
say they would be very wise not to stick their house on them.
The case for emerging markets
is that these strong growth economies are one of the best long-term bets
around, especially for those making regular investments using their
annual tax-free Isa allowance.
But remember emerging markets success is not guaranteed and never put all your eggs in one basket.
Emerging markets fund tips
Managed
by Jonathan Asante and Angus Tulloch, the First State Global Emerging
Market Leaders fund seeks to identify high quality companies with strong
management, long term growth prospects and high visibility of earnings.
The long term performance has been excellent although the fund’s
defensive bias can result in periods of underperformance in strong
markets. Currently the fund is underweight China and Brazil and
overweight less popular areas such as Taiwan and South Africa, which
Asante and Tulloch believe offer more compelling valuations.
Asia
had a poor 2011 as investors remained concerned over the global
economic recovery, however the long term story for Emerging markets (and
many Asian countries still count in this sector) is positive. So the
recent weakness in the markets provide investors with a better entry
point. Add to that the expertise from the First State team and investors
can access the region through a manager who is skilled at running money
in typically volatile markets of Asia.
As
a first step in emerging markets I would recommend Aberdeen Global
Emerging Markets, especially through a monthly saving plan that helps
smooth out the inevitable volatility. The team at Aberdeen have been one
of the best for over 20 years. They take a long term approach rather
than trading all the time. Indeed many of their top holdings have been
in the portfolio for 10 years. You should approach buying this fund in a
similar way.
For
those who wish to drill down further and are happy to take on a lot
more risk try Neptune Greater Russia, very much an oil based economy,
but with the price very high the Russian market is still lowly valued
compared to most other emerging markets.
Investment trust emerging markets ideas
Templeton
Emerging Markets Investment Trust, run by Mark Mobius, was launched in
June 1989. Over the intervening two decades and more shareholders have
received handsome long-term investment returns – noting, though, that
performance has proved choppier over shorter periods.
He
remains of the view that emerging market countries continue to benefit
from large fiscal reserves and strong macroeconomic trends. He considers
that emerging markets are therefore still in a generally sounder
position than many developed economies for whatever the future holds.
In
summary, Templeton Emerging Markets might be described as the ‘IBM’ of
the global emerging markets trust sector, offering a blend of
competence, size and share liquidity that are hard to match. We are
happy to recommend it as a medium to long-term Buy on this basis.
Scottish
Mortgage gives investors exposure to a genuinely global portfolio of
companies that the manager expects to deliver superior and sustainable
long-term growth – this bears little resemblance to any benchmark.
Several
years before it became the consensus view, the manager rebalanced the
portfolio to reflect the rising economic power of the emerging nations.
Ten years ago, the UK represented 45% of total assets while today the
weighting is just 12%. During this period, exposure to Asia Pacific and
Emerging Markets has risen from 6% to 31%.
The
manager’s conviction is also reflected in a relatively concentrated
portfolio, with around 80 equity investments. The economic transition
from developed to developing countries remains the key investment theme.
A second important theme
is the acceleration of technological innovation with many sectors now in
an exponential growth phase – these include data storage and handling,
energy, medicine and genetics.
Given
the portfolio composition and relatively high levels of gearing,
investors must be aware that during more challenging investment
backdrops, the company is likely to underperform. That said, we have
confidence in the manager’s ability to continue to deliver superior
returns over the longer term.
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