Diversify to avoid single country fund

FOR INVESTORS looking for exposure to emerging markets, Jeff Chowdry recommends a diversified fund, which gives broad exposure to emerging markets, “because if you go down the route of a single country fund, there is always the chance of a big event impacting on the market”.

He gives the example of falling oil prices, which have been a net negative for oil-producing Russia – but a net positive for India, which is a big importer.

Investors should see emerging markets as a component of a portfolio, and look to invest about 10 per cent of their equity allocation to a pooled fund, taking a three- to five-year view on returns.

Quinn Life offers a number of index-linked funds focused on emerging markets.

Its Emerging Markets Freeway aims to track the Bank of New York Emerging Markets 50 ADR index, which is a measure of the performance of 50 of the largest and most actively traded emerging markets depositary receipts, and it also has a number of funds which are specifically focused on certain markets. These include the Latin America Freeway, which tracks the performance of the SP Latin America 40, which represents the performance of 70 per cent of the total market capitalisation of the leading Latin American economies of Mexico, Brazil, Argentina and Chile.

It also offers the China Freeway, which tracks the FTSE/Xinhua China 25 index, a measure of the performance of the top 25 companies listed in Hong Kong, including companies such as Bank of China, China Mobile, and China Petroleum Chemical.

Rabodirect distributes a number of emerging market-related funds to Irish-based investors, including the Robeco Emerging Stars Equities fund, the Robeco Chinese Equity Fund and the BlackRock Global Funds Emerging Europe Fund.

Investors can also access emerging markets through Friends First’s Magnet Portfolio, which offers access to three growth asset classes, including property, equities and currency, plus two secure classes.

Part of the fund’s equity allocation is to emerging markets.

Standard Life offers a China Equity Fund, and Canada Life has an emerging markets equity fund, which typically invests in at least six emerging market countries and will not invest more than 35 per cent of its net assets in emerging market issuers of any one country. It is managed by SEI Investments.