Adviser interest returns to emerging markets

Emerging markets have inspired renewed interest from financial advisers with over 60% of those surveyed saying they expect to invest in the sector this year.

Cofunds, a UK-based fund platform, found 88% of the advisers would invest in a general emerging market fund to avoid concentration risk in one country, but that Brazil, India and China would attract some single-country investment.

Cofunds surveyed 243 advisers in May, but only released the findings today. The findings do not distinguish between bonds and equities.

In total, 67% of advisers expected to invest in the emerging markets sector during 2014 and it follows a period when 57% of them saw a decrease in emerging market business.

Net sales of emerging markets funds in the second quarter were up 159.6 percentage points from the previous quarter, reflecting the views of the 43% of advisers who said they felt “optimistic” about the emerging market sector.

In many regions confidence in emerging markets is beginning to return, particularly in areas such as India, South Africa, Turkey, Brazil and Indonesia, where elections are on the horizon, says Cofunds.

Adam Smith, commercial director at the firm, says: “As the underlying economic conditions within emerging markets appear to be improving, the sector is beginning to look like an attractive proposition again for advisers looking to diversify their client portfolios and spread their exposure.”

The findings come as Craig Botham, emerging market economist at Schroders, suggests there is a modest recovery in the region’s economies.

Botham looked at exports and found improvements in Central and Eastern Europe, Middle East and Africa (CEEMEA), where exports surpassed Asia and Latin America.

Also, Asia is seeing more success in meeting US demand and Botham says a recovery in US wages should help a revival in US consumer spending, benefitting Asian exporters.

However, Latin America is more problematic. Commodities are an important export but Latin America is failing to provide the goods that the major economies require – particularly for the US, Latin America’s largest trading partner, where the shale gas revolution has seen demand for Latin America’s exports decrease.

©2014 funds europe



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