Mark Dampier: Emerging markets can't be ignored

The Analyst

Emerging markets have always been a favourite sector of mine for long-term investing. Indeed when my son was born in 1990, I started an emerging markets savings plan for him – just £10 per month to begin with! Nineteen years later he has got a nice little nest egg, despite several rough periods for those markets.

My confidence in emerging markets has not waned over the years. They are a must for virtually any investor who has a long-term investment horizon. Emerging markets have most of the world population, yet in stock market terms are still quite small. They have the potential to be more dynamic, although anyone investing there must accept that emerging markets also tend to be higher risk and volatile.

The biggest emerging market in the world is China, and the industrial revolution that is taking place there is well documented. The potential for a political revolution at some point cannot be ignored, but that is the only thing I believe could seriously derail China's development into an economic superpower. There will be pauses for breath along the way, and times when China does less well (we are seeing one now), but once you give a population the glimpse of a better life, it's going to be impossible to stop it in its tracks.

So how do you get exposure to emerging markets? It is now quite possible to buy funds that specialise in individual countries. So, for example, you can buy a fund that focuses purely on Russia or China or India or Brazil; even Middle East and Africa funds are out there. However, for the vast majority of investors, the best place to start will be a more diversified fund that can invest globally. This allows the fund manager to seek the most promising companies from pretty much any emerging market economy in the world.

That leads me to the Ignis Hexam Emerging Markets fund, set up in 2006 as a result of a joint venture with Resolution Asset Management (now called Ignis). Bryan Collings is the lead fund manager at Hexam and heads up their investment team. He set up Hexam effectively for two reasons: he wanted to manage money within what we call a boutique environment, without the bureaucracy of a larger company, and he wanted to focus purely on investment and leave the admin and sales to someone else (this is the role that Ignis performs).

The research process blends a top-down view of the wider economic landscape with detailed analysis of individual companies. It is also a high conviction portfolio with around 35 stocks, so the manager will only buy shares in which he has a high degree of confidence (although obviously this won't stop him from being wrong occasionally). There are over 1,000 stocks from which they can potentially build a portfolio, but they filter this universe down to around 130 stocks that they get to know well through research trips and the most detailed analysis.

The performance of the fund so far has been good. It had a difficult period between September and December of 2008 when emerging markets generally struggled as international investors withdrew their money in a bid to lower their overall risk levels. Shares were sold without much regard for the company's fundamentals; this is always a difficult time for fund managers but does allow them to pick up some good bargains.

At present the biggest country exposures are Brazil at 23 per cent, China at 17 per cent and Russia at 12 per cent. The team at Hexam believes that the dramatic falls in the Russian market are now over. Their views echo those I have heard elsewhere from funds such as Neptune Russia & Greater Russia and Jupiter Emerging European Opportunities.

In conclusion, this is a small dynamic team who are owner-managers of the business and who live and breathe emerging markets. Short lines of communication and highly incentivised individuals in an area full of potential amounts to a strong buy signal to me – but remember this is definitely an area for the long term.

Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Financial Controller

    £45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Recruitment Genius: Sales Adviser - OTE £24,500

    £22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

    Recruitment Genius: Business Development Executive / Sales - OTE £40,000

    £18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

    Day In a Page

    Mullah Omar, creator of the Taliban, is dead... for the fourth time

    Mullah Omar, creator of the Taliban, is dead... for the fourth time

    I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
    Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

    Margaret Attwood on climate change

    The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
    New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

    New Dr Seuss manuscript discovered

    What Pet Should I Get? goes on sale this week
    Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

    The cartoon hedgehog leading the way into a whole new reality

    Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
    Ants have unique ability to switch between individual and collective action, says study

    Secrets of ants' teamwork revealed

    The insects have an almost unique ability to switch between individual and collective action
    Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

    Donovan marks his 50th year in folk

    The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
    Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

    Twitter accused of 'Facebookisation'

    Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
    Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

    Jane Birkin asks Hermès to rename bag

    The star was shocked by a Peta investigation into the exotic skins trade
    10 best waterproof mascaras

    Whatever the weather: 10 best waterproof mascaras

    We found lash-enhancing beauties that won’t budge no matter what you throw at them
    Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

    Diego Costa: I go to war. You come with me...

    Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
    Ashes 2015: England show the mettle to strike back hard in third Test

    England show the mettle to strike back hard in third Test

    The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
    Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

    Charley Hull: 'I know I'm a good golfer but I'm also just a person'

    British teen keeps her feet on ground ahead of Women's Open
    Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

    Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

    Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
    Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

    Our choice is years of Tory rule under Corbyn or a return to a Labour government

    Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'
    Singapore's domestic workers routinely exploited and often abused in the service of rich nationals

    Singapore's hidden secret of domestic worker abuse

    David Cameron was shown the country's shiniest veneer on his tour. What he didn't see was the army of foreign women who are routinely exploited and often abused in the service of rich nationals