Despite the higher levels of economic growth in emerging countries, emerging equity markets have significantly lagged their developed peers. Considered a high-risk asset class, emerging markets have been hit hard by the flight to safety that has occurred due to global uncertainty over recent periods.
Given the significant role China plays in both emerging and developed markets, there has been a strong focus on China and the slowing of its economic growth rate. The tempering of Chinese GDP growth has been met with strong negative movements in emerging markets. With all the negative sentiment towards emerging markets and the expectation of status quo growth, it is, however, easy to miss the bigger picture. The Chinese economy remains the second-largest in the world and is still growing at a rate that is the envy of all developed countries. As such, while growth may not be at the level that was exhibited in the past, it should ultimately be where much of the global economic growth is driven from.
Winner: Aberdeen Asset Management
Zenith says: Aberdeen’s investment team comprises 43 investment professionals. Based on the level of resourcing at its disposal, Zenith considers Aberdeen’s capabilities to be amongst the strongest in the market. Aberdeen consciously protects its investment culture, with investment staff rarely joining Aberdeen from other firms with different investment philosophies; and we believe the depth and quality of portfolio management expertise, as well as Aberdeen’s research strength, provide Aberdeen with a peer relative advantage. Aberdeen adopts a benchmark-unaware and long-term investment approach that focuses on investing in high-quality, well-managed companies that are assessed as having strong earnings potential and are attractively priced. In constructing the portfolio, the team debates and discusses the merits of stocks, with the requirement that all individuals must agree on a stock idea for it to be included in portfolios. Although this portfolio management structure is less formalised than most approaches reviewed by Zenith, we are comfortable with the process, given the quality and experience of the key individuals involved, and their long history of working together at Aberdeen.
Interview:
The Aberdeen Emerging Opportunities Fund aims to deliver high capital growth over the medium to long term by investing in emerging stockmarkets or companies with significant activities in emerging markets. For the year to June 30, 2013, the fund returned 15.60 per cent, outperforming the MSCI Emerging Markets Index (AUD unhedged) by 3.48 per cent.
Emerging markets such as Mexico, Brazil and India have thrown up some compelling investment opportunities in the last year, according to Stuart James, investment specialist at Aberdeen.
“We really understand the companies we invest in and we’re looking for companies which demonstrate strong management skills and robust balance sheets,” he says.
James says the group’s main differentiators are the lengthy experience of its investment team and its consistent approach. Aberdeen has been managing emerging market portfolios since 1987 and since that time has successfully navigated a number of crises including the 1994 Mexican Tequila crisis, the 1997 Asian crisis and the 1998 Russian debt default.
“People often learn more during these periods of volatility than under normal conditions and the biggest lesson we’ve learned is to stick to our processes and be disciplined,” James says.
“We don’t get distracted by noise and sentiment but take advantage of volatility, rather than become a victim of it.
“Many clients want exposure to this exciting asset class but they want to access it in a manner that tempers the associated volatility.”
– Leng Yeow
Finalists:
– Fidelity Worldwide Investment (Asia)
• Experienced portfolio manager with a strong performance track record in the region.
• Well-resourced and experienced, regionally-located research teams to support the portfolio manager.
• Access to additional internal resources via the knowledge and expertise of the firm’s portfolio managers responsible for related regional strategies.
– Macquarie Investment Management (Asia)
• Portfolio management team possesses a sound understanding of Asian equities, the underlying macro environment and has strong industry ties.
• Rigorous financial modelling and detailed qualitative research.
• Access to a broad set of experienced investment professionals within the broader Macquarie business, across multiple asset classes.
