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Aviva Investors increases emerging market allocations

Aviva Investors started allocating to emerging market equities and debt in February through a multi-asset fund, one of the firm’s executives revealed.

The firm also discarded an emerging markets underweight position in its balanced funds, said Peter Fitzgerald, global head of multi-assets at the firm, who spoke to Funds Europe on the sidelines of the FundForum International conference.

Earlier this week, Martin Gilbert, chief executive of Aberdeen Asset Management, said he felt the recent emerging market rally was “unloved”.

The February allocations to emerging markets, which also persisted through March, were made by the Aviva Investors Multi Strategy range, which uses hedges to protect against macro-economic events.

“We say ‘this is our core view of the world’ and build a portfolio based on this view but it’s impossible to predict the future,” said Fitzgerald.

One of these defensive strategies in relation to emerging markets is a long Australian bond position, favouring the front end of the yield curve such as bonds with a two-year maturity. This may protect against China if it gets into trouble again.

As the renminbi has been fairly volatile, Fitzgerald has used options strategies on the Chinese currency and shorted the Singapore dollar to add protection.

He admitted that, looked at in isolation, some of the fund’s holdings may appear risky, but most of the risker positions are relatively small.

The Aviva move towards emerging markets reflects growing interest in the area. Baring Asset Management – also through a multi-asset fund – is among other managers with increased allocations to these regions.

©2016 funds europe