Ashmore sees higher allocations to EM as value appears

Emerging markets sign1Negative investment performance and net outflows hit Ashmore Group, a specialist emerging markets asset manager, in the last quarter.

The London-based company saw a $7.8 billion (€6.8 billion) fall in assets under management (AUM) as sentiment to emerging markets dropped, but Ashmore says that certain investors are now increasing allocations to the region as they see more value appearing.

AUM decreased to $51.1 billion through net outflows of $4 billion and negative investment performance of $3.8 billion.

Ashmore says the net outflow reflects the “typically quieter quarter” combined with a small number of large institutional redemptions that mostly occurred towards the end of the period.

These redemptions were primarily in blended debt, external debt and local currency, and with no specific patterns in terms of type of institution or geography.

Net outflows were “modest” in local currency, corporate debt, equities and multi-asset, while flows were flat in alternatives and overlay/liquidity.

Most investment themes experienced negative absolute investment performance in the quarter, particularly the local currency theme, which continued to be impacted by US dollar strength.

Relative performance over the period was “solid” in blended debt, local currency and most of the specialist equity funds, and slightly weaker in external debt.

Corporate debt underperformed as a consequence of its bias to higher yielding assets, which in mark-to-market terms fared worse than investment grade credits.

Yet Ashmore says the negative sentiment towards emerging markets in the late part of the quarter has provided good opportunities for the company’s value-based investment processes to acquire risk at attractive prices, particularly in high yield corporate credit, local currencies and selected external debt markets where the underlying credits are sound but spreads have widened to attractive levels.

Mark Coombs, chief executive officer of Ashmore Group, says: “Concerns over global growth prospects affected sentiment and resulted in price weakness and greater volatility across global markets.

“However, this backdrop has provided good opportunities to add risk where prices have diverged from fundamentals, and certain investors are now acting upon the value apparent in the emerging markets and are increasing allocations.”

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