BlackRock has launched a fund which aims to provide a one-stop shop for investors looking for global emerging market (GEM) exposure, Wealth Manager can reveal.
The Luxembourg-domiciled BlackRock Strategic Funds – Emerging Market Allocation fund is designed to deliver equity-like returns without the volatility commonly associated with emerging markets.
The fund is managed by BlackRock’s GEM head Jeff Shen (pictured), with support from Seanna Kim and Rodolfo Martell.
The trio has the flexibility to invest in all asset classes in traditional GEM and frontier markets. It also has the ability to look beyond holding long-only stocks and bonds to include ‘alternative’ strategies like long/short.
The team has identified three factors it believes are fundamental drivers of returns: the trajectory of economic growth, interest rates and alpha generation. At launch, economic growth will account for 70% of exposure with rates at 20% and alpha 10%.
The fund launches at a time of extreme volatility in emerging markets. This has been triggered by fears about the impact tapering will have on the region, raising concerns about the structural problems in these countries in the process.
This turbulence has seen currencies in Argentina, Turkey and Russia all plunge to record lows.
BlackRock believes its proposition can harness this volatility to its advantage. 'The diversity and depth of emerging market territories is growing, and risk levels and opportunities are constantly changing,' Shen said. 'It is becoming harder to talk about emerging markets as a group, with increasing country differentiation making it important to monitor countries on a fundamental basis.”
'We believe the fund will be attractive to investors because it can move swiftly to seize the best opportunities for growth, but also reduce risk at times of market stress, meaning investors enjoy a smoother ride.'
Meanwhile BlackRock head of retail for Europe, Middle East and Africa, Alex Hoctor Duncan (above), highlighted the importance of sticking with emerging markets during volatile times.
'Emerging markets typically experience greater volatility relative to developed markets, like we have seen in recent weeks. History has shown however, that having the conviction to stay the course throughout volatile periods can have a meaningful impact for investors,' he told Wealth Manager.
'A £100,000 investment in both emerging markets equities and bonds since the turn of the century would have returned £329,317. Missing out on the top 25 days during this period would have resulted in a return of £226,470, showing that when investing in emerging markets it really is "time", not "timing" that counts in the long term.'