‘Trump win could boost emerging markets’

Donald Trump’s victory in the US presidential election could jeopardise the recent rally in emerging markets if the US takes an insular, anti-globalisation stance. This week, veteran fund manager Neil Woodford said that Mr Trump’s election could “puncture the love affair that the market has had this year with emerging market shares and bonds”.

After years in the doldrums, emerging markets have come back into favour among investors recently.

Over the past year, the average global emerging markets fund has returned 31pc, and most funds’ oneyear returns eclipse their threeyear performances.

The Invesco Perpetual Global Emerging Markets fund sits in the top 10 funds in the sector for returns over five years and in the top 15 over three years.

Telegraph Money spoke to manager Dean Newman about the struggle to find cheap stocks in Asia and what a Donald Trump presidency would mean for emerging markets.

How do you pick stocks?

We take a long-term view of at least three years, and if a stock is expensive, we won’t own it regardless of how big it is in the benchmark.

How much we allocate to each country depends on both stock analysis and the wider economic backdrop.

We have a global view, then each region has its own economic and political dynamic.

At the country level we think about local standards of governance, political trends and the economic structure.

We might want exposure to a wider trend and so look for stocks that can deliver that.

Alternatively, we might like the big picture of the country but think stocks are too expensive.

What does Mr Trump’s victory mean for emerging markets?

We believe emerging markets will continue to be underpinned by improving fundamentals in the developing world.

Mr Trump pursuing pro-growth policies should boost the US economy while widening the budget deficit. This could put pressure on the dollar, which is good news for emerging economies.

It’s unclear whether tariffs and protectionist measures may come in, but we would expect increased trade friction, particularly with China, although USRussia relations could thaw.

Which countries do you have large exposure to, and what do you make of the excitement surrounding Latin America?

We have relatively large exposure to Europe, the Middle East and Africa, including Russia, Turkey, South Africa, Greece and the United Arab Emirates.

After quite a few lean years, politics in Latin America is turning towards the more business-friendly centreright – we have increased our position somewhat this year.

We think there are some excellent businesses, but valuations tend to be at a discount.

We hold less than the benchmark in Asia, which, of course, is a big part of emerging markets.

There are a lot of attractions, but we struggle to find enough cheap stocks in countries such as Malaysia and Taiwan, and we are put off Chinese financials by debt levels.

Dean Newman of Invesco Perpetual’s Global Emerging Markets fund tells James Connington why he is optimistic

You took over the fund in 2007, and for the first few years it tracked closely to the benchmark. What changed?

I became head of the emerging markets team in 2007, and now have a team of six people with an average 15 years of experience. Building that team took time, and it can take a while for things to kick into gear. We made a conscious decision to be more active versus the benchmark. It’s evolutionary; we’ve homed in on ideas with the strongest potential.

Do you have your own money in the fund?

Yes, my team and I all do.

If you hadn’t become a fund manager, what would you have been?

My wife says in a different life I would have been a doctor.

How to buy the fund as cheaply as possible

The trust has a total cost (the “OCF” or “TER”) of a year. Be sure to buy the right “share class”, which is “Z”. The investment shop through which you buy the fund will also levy a charge. Some will charge

1pc

a percentage of the amount invested, others will apply a flat annual fee. Our colour coded tables at

telegraph.co.uk/ investing

will guide you to the cheapest fund shop for your circumstances.

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