Best Offshore Fund Managers
Hype or reality? Just as the world’s big equity markets
are tumbling, it seems almost irresponsible for an investment
magazine to be discussing the possibility of a sector that could
create vast growth.
However, as we spoke to fund managers involved in the sector,
it became apparent that many emerging market fund managers believe
the sector is about to mushroom.
Best Offshore Fund Managers & The Crucial Factor
The crucial factor, almost every fund manager agrees, is the US Federal
Reserve’s (and latterly the rest of the world’s) rate-cutting
exercise. They argue that when Greenspan has finished with
his cuts, the extra money available will cause US demand for emerging
market products to soar.The fund managers we spoke to reckon the
current recession is driven by sentiment rather than economic fundamentals
and that it will not continue beyond the summer.
Best Offshore Fund Managers and The Emerging Markets
Most also seem to believe that emerging markets will outperform
the major markets this year. But selectivity will be critical. Our
box (see below) shows which economies have been performing strongly
in recent years, although this is no indicator of future developments.
In the short term, those we spoke to said it will be important to
avoid emerging markets with US exposures, but that once the rate cutting
is over, this will change.
They were also almost universally positive
about emerging markets’ medium-term prospects. The view is
reinforced by a report from Foreign and Colonial, which predicts
5 per cent growth for 2001 throughout emerging markets against growth
of 2.0 per cent in developed countries.
Best Offshore Fund Managers & Emerging Markets
But a word of warning. For reasons of volatility, emerging markets
are not the place for every investor. If you need to avoid risk, if
you are close to retirement, for example, and do not have the cash
to spare, we suggest you should avoid emerging markets. The risk is
not worth it. Emerging or submerging?
Emerging markets by region
Index movements year to 21 march 2001
MSCI Emerging Markets Free index: -3.3%
MSCI Emerging Asia: 2.5%
MSCI Emerging Latin America: -1.1%
MSCI Emerging Europe: -12.7%
Russia RTS 100: 24.8%
Taiwan: 20.1%
Shanghai: 54%
Nikkei: -17.6%
The good
Deltec Emerging Markets Equities US$
US$100 investment 1 year ago (ranking): US$98.61 (1)
US$100 invested 3 years ago: US$97.33 (11)
US$100 invested 5 years ago: US$129.68 (2)
Best Offshore Fund Managers - Scott Piper
Fund manager: Scott Piper, managing director, Deltec Piper: “I
am very pleased with our performance. We are up 9 per cent this year
against - 2 per cent for the index.The strategy has been to cut our
telecos exposure, which we sold in the January rally. This has helped
us to outperform. In Mexico we are overweight in financials and in
Brazil we are excessively overweight in areas that benefit from a
weaker currency. Europe is weak except Russia, where we have done
well due to our oil exposure. In Korea our only exposure is to Samsung,
which is set to benefit from a weakening Japanese currency.”
Prediction: “I would say I am very positive about emerging
markets. At the moment there are problems, but the next few years
look very good. Over the past few years, US investors have withdrawn
the cash normally going to emerging markets. But now we are returning
to the time when investors are reinvesting in them. Emerging markets
are going to be a good buy in three to six months time.”
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