INVESTING TIPS: Top fund and trust ideas for emerging markets
By Marc Shoffman for Thisismoney.co.uk
If you want emerging market funds to add some worldwide flair to your investments, read This is Money's experts' recommendations.
From the bafflingly wide range, they have picked some ideas to use as starting points for what will hopefully be successful investing.
Of course, which fund is best for you depends 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.
On the up: Emerging markets such as Brazil are where much of the world's growth is expected to be over future years.
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. It is also worth remembering that risk varies throughout this broad category, an overall emerging markets fund will be spread across a variety of countries and continents, others are region, country or sector specific.
The expert's emerging markets fund ideas
Damien Fahy, of Fund Expert highlights Jupiter India
Ongoing charges: 1.09 per cent
Yield: 0.5 per cent
The Jupiter India fund invests in companies which operate or reside in India. It will also look further afield for firms based in Pakistan, Sri Lanka and Bangladesh and in companies which derive a significant proportion of business from or within India.
Mr Fahy says: 'Those looking for a focused exposure to an emerging market should look at Jupiter India. India can sharply outperform, despite global wobbles, as domestic investors grow increasingly confident about the future, and their government’s commitment to reform.
'The Indian stock market has turned a very important corner - the reward for greater clarity over much needed reforms to set India on a very long run recovery.
'There is almost no demand from UK investors, despite it being more than twice the size of the EU population (including the UK) and with extraordinary potential. Jupiter India is up considerably since the recent lows in September, but investors must be comfortable with volatility.'
Adrian Lowcock, independent investment analyst, highlights: JPM Emerging Markets Income
Ongoing charges: 0.93 per cent
Yield: 3.8 per cent
This fund invests in shares of emerging market companies. Big regional exposures include Taiwan, South Africa and Hong Kong.
Mr Lowcock says: 'Manager Richard Titherington’s focus is on the future, where earnings and profitability will be in five years’ time, not currently. He holds between 50 and 80 companies with about 60 per cent invested in companies that yield 3 per cent and can grow their dividends, 20 per cent in low yielding companies with significant potential to grow their dividends and the remaining 20 per cent in high yielding companies with dividends over 6 per cent. This diversification means the fund is able to deliver a combination of an attractive growing dividend and capital growth.
Adrian Lowcock, of Hargreaves Lansdown, also highlights: Fidelity Emerging Markets
Ongoing charges: 1.1 per cent
Yield: 0 per cent
This fund invests in companies listed or operating in a number of emerging markets.
You will find investments in India, South Africa and companies listed in the United States, but conduct business in emerging markets.
Mr Lowcock says: 'This fund is a best of breed portfolio with a concentrated fund. Manager Nick price focuses on investing in good companies at the right price. He is looking for companies able to deliver strong growth and higher return on investment. Price has favoured South Africa and Sub-Sahara where he sees clear growth opportunities as the region develops. This fund is more suitable for investors willing to take on risk as It is likely to be more volatile.’
Darius McDermott, of Chelsea Financial Services, highlights Lazard Emerging Markets
Ongoing charges: 0.92 per cent
Yield: 1.9 per cent
This fund looks for the ‘global brands of tomorrow’ in emerging markets.
It has regional exposure to Asia, Latin America, emerging European markets and Africa.
Mr McDermott says: ‘Many leading global brands are now emerging market companies and this fund uses a 230-strong team of investment analysts to identify the global brands of tomorrow in these developing regions.
‘The managers take a bottom-up, stock-picking approach to achieve this and use market volatility created by macroeconomic concerns to time entry and exit opportunities. This strong value discipline has led to this being one of the stand-out funds in its sector.’
Investment trust emerging markets ideas
John Newlands, of Brewin Dolphin, highlights Templeton Emerging Markets Investment Trust
Ongoing charges: 1.29 per cent
Yield: 1.3 per cent
This investment trust has a big Asia Pacific equities bias. Its main regional exposures is to Hong Kong & China, Brazil and Thailand.
Mr Newlands says: '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.'
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