Mark Dampier: Emerging markets can't be ignored
Saturday 21 March 2009
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; request a free guide on NISAs from Hargreaves Lansdown
Emergency call 'started off dumb, but got pretty serious'
Argentinian scored 'rabona' wonder goal for Tottenham in Europa League – see it here
- 1 This 'woman calls police to order pizza' story isn't going where you're expecting
- 2 Watch what happened when food critics were unknowingly served McDonald's
- 3 Jimmy Carr's controversial Oscar Pistorius joke goes a bit too far at the Q Awards
- 4 Ottawa shootings: Bruce MacKinnon's cartoon is the perfect tribute to soldier Nathan Cirillo
- 5 Of course, teenage girls need role models – but not like beauty vlogger Zoella
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Residents should throw a street party and mix with immigrant neighbours, councils told
London bus driver 'kicks gay couple off for kissing'
iJobs Money & Business
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Competitive (DOE): Guru Careers: A COO / Chief Operating Officer is needed to ...
£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...
120-150k: Accountancy Action: We are looking for an experienced CFO from a min...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village