Reason to cast a fresh eye at emerging markets
Despite political noise, emerging-market GDP growth is outperforming developed markets.
ageneral notion exists that emerging markets are not the place to be in the current lowreturn environment, but that’s an extremely misplaced view, believes Feroz Basa, Old Mutual Global Emerging Markets Fund Manager at Old Mutual Investment Group’s Global Emerging Markets boutique.
His fund with R1.6bn under management generated an annualised 24% last year in US dollar terms and an annualised 12.2% since inception (August 2011) in rand terms. It’s currently rated 7/197 on one-year performance in its international peer group; 10/172 on three years; and 40/139 on five years.
Rated a high-risk fund, it’s suited to investors seeking high long-term capital growth through exposure to many of the best companies in emerging markets.
It has consistently outperformed its benchmark (MSCI Emerging Market NR Index) since inception. The index has reflected an annualised 9% return since 2000 and 2.49% on 10 years. The biggest rise during the past six years was 18.22% (2012) and the biggest drawdown 18.42% (2011).
A large number of emerging companies is currently attractively priced, have excellent track records, and have shown the ability to generate strong returns in hard currency terms, says Basa. They include Samsung Electronics, Taiwan Semiconductor, Sino Biopharmaceutical, Magnit and Tata Motors.
“In fact, opportunity emerges when assets are unloved. Emerging-market valuations have fallen to levels that entice investors to carefully consider the more favourable long-term prospects they offer. Capital Economics forecasts a rebound in the Emerging Market Index over the next two years, while equities in much of the developed world will grind only slightly higher.”
Other forces may also influence the market in the short term, he says, with improving news out of China and the recovery in commodity Old Mutual Global Emerging Markets Fund Manager