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Citywire Ratings: eight gems defying the emerging market slump
by Nisha Long on Sep 30, 2013 at 13:15
After our recent Ratings revamp, we shine a light on the managers who have conquered turbulence in emerging markets and get under the bonnet to find out what's driving these returns.
Jonathan Asante/Glen Finegan - AAA
Jonathan Asante manages a number of funds in the GEM space, including First State Global Emerging Markets and First State Global Emerging Markets Leaders, both of which he runs alongside Glen Finegan.
The pair have both been rated AAA this month, of the vehicles the duo manage, the £4 billion Leaders fund, which was recently soft closed to new investors, is the most popular.
Despite the rout in emerging markets, Asante and Finegan have performed strongly, and over the last three years fund has returned 29%, handsomely outperforming the MSCI Emerging Markets TR Index in dollar terms, which has increased 3.6% over the same stretch.
Asante and Finegan's big bets include South Africa and consumer staples, with their Leaders fund is overweight both.
Edward Lam - A
Edward Lam, who runs the Somerset Emerging Markets Dividend Growth fund, describes himself as a ‘natural contrarian’ and believes that despite the difficulties developing economies are facing, income-paying stocks will continue to delivere.
He has, however, adapted his portfolio to shield it from some of the bigger threats; three years ago Lam’s China exposure was around 15% though today it is around 5%, for example.
Currently, Lam does not like the EM consumer theme and typical of a contrarian, this is quite different to his peers such as First State's Asante. He believes real wage growth has not improved enough to justify the way consumers are spending, and as a result favours Industrials.
Like his First State rivals, Lam, A-rated by Citywire, has outperformed the MSCI EM TR Index over the last three years, delivering a return of 19.75% for investors.
Devan Kaloo - A
Despite slowing growth in India and the rupee falling to a 20-year low, Devan Kaloo, manager of the Aberdeen Emerging Markets fund, still has 12.3% of his fund exposed to India, as at the end of August.
Kaloo also remains positive on China where he is backing the likes of Samsung Electronics (5.1%) and China Mobile (3.9%) to deliver despite widespread concerns about stalling manufacturing.
However over the last three years Kaloo has proved his skill when it comes to backing companies that can deliver, with his £3 billion fund returning 12%.
Francis Seymour - A
A-rated Seymour believes the key focus in emerging markets should be on the long-term aspirations of the average man and woman, and as a result he is playing consumer spending. He is particularly bullish on Thai Beverage, which he bought into as a special situation and following the company's acquisition of a 28.7% stake in Singapore conglomerate Fraser & Neave, which should help boost future growth.
At the end of August Seymour had almost 60% of his £2.2 million portfolio invested in Asia. For the three year period to the end of August his fund posted a return of 13.3%.
Mark Asquith - A
He likes to back GEM smaller companies which he believes are ‘inefficient’, and Asquith's strategy involves looking at sustainability and growth of firms' free cash flow rather than looking at their earnings in isolation.
At the end of August Asquith's top holdings were Union National Bank (4.67%) and Warsaw Stock Exchange (4.4%).
Dean Newman - A
The fund has an overweight position in consumer related stocks such as tobacco and retailers, and the manager is bullish on healthcare as he believes these stocks are likely to prosper from growing affluence. Newman's fund is also tilted towards real estate and property companies, with demographic trends supporting his view that more homes will be needed to cater for an expanding urban workforce.
Geographically, Newman holds more than 16% of his fund in Korean equities and just over 13% in China. His top holdings at the end of August were Samsung Electronics (6.09%) and TSMC (3.97%).Ken Fisher - A
Over the last 36 months he has posted returns of -4.74% on the fund outperforming the MSCI EM (Emerging Markets) TR USD index which lost 5.7% over the last 36 months. Fisher runs a concentrated portfolio of 59 stocks and adopts a top down approach to determine the countries and sectors that are likely to create the highest levels of returns. At the end of August his top holding was Tencent Holdings Limited (5.05%) and Magnit Gdr (3.42%) which retails and distributes consumer goods. Geographically, more than a fifth of his fund is invested in China and around 12% in Mexico. On a sector level, financials (27%), Information Technology (22.6%) and Consumer Staples (16.2%), make up over a half of his portfolio.
Emery Brewer/ Dr Ivo Kovachev - +
Co-managers Emery Brewer and Dr Ivo Kovachev run the JOHCM Emerging Markets fund. The pair are attracted to the long-term prospects within the growing consumer space, as well as the infrastructure boom and the abundance of natural resources in the emerging world.
To capture these themes, they have added to their position in Prince Frog, a manufacturer and distributor of healthcare products in China, and recently the company has started to gain market share from rivals such as Johnson & Johnson.
At the end of August, the duo's top holdings were Samsung Electronics (3.6%) and Naspers (2.5%). A fifth of their portfolio was invested in consumer discretionary stocks and almost a fifth in IT.
Over the three year period to the end of August Brewer and Kovachev have delivered returns of 5.34%.