The outlook for equities and bonds around the world in 2022
As we begin a new year, we’ve gathered the views of equity managers from around the world and fixed...
There are now less than two days left to make the most of our handy tax-free ISA wrappers. And, with the clock ticking, the natural instinct is to maybe buy into the comfort of our home market or into multi-asset funds which take care of diversification for us.
However, for the more risk-tolerant investor, and for those seeking an income boost, it may be prudent to consider buying into emerging market assets.
1. Global growth is improving and emerging markets tend to do well in this type of environment.
2. As a result of improvements in corporate governance, more and more emerging market-domiciled companies are starting to return money to shareholders in the form of dividends.
3. Emerging market bonds tend to pay a higher yield due to the increased risk of the company or government defaulting on their loan. However, with rates close to 6%, investors are currently well-compensated for this, in our view.
4. Populations across emerging markets are young and increasingly well-educated, which means workplace productivity is rising. These populations are also becoming increasingly middle class, which is good for consumer spending.
5. Finally, there is a huge choice of countries and regions to invest in within emerging markets – from South America, to Asia, to peripheral Europe.
Manager Matthew Vaight has a keen belief that value creation is the biggest driver of long-term investment returns. As such, he looks for companies which he thinks have been mispriced by the broader market. The fund currently holds 66 stocks, which Matthew has chosen based on their individual company fundamentals.
James Donald’s Lazard Emerging Markets fund adopts a group-based approach to stock selection, which makes the most of the company’s well-resourced emerging markets team. They focus their attention on unloved and undervalued stocks, which they hunt for based on each individual company’s fundamentals.
Headed up by Claudia Calich, this fund is able to invest across the entire emerging market bond spectrum – whether this is in government bonds or corporates, and whether the assets are denominated in local currencies or US dollars. Claudia begins her investment process by focusing on the macroeconomic backdrop, looking at factors such as inflation, politics, commodity prices and central bank policies. Its current yield is 5.5%*.
Manager Brett Diment is part of a highly-experienced emerging markets team at Aberdeen. He looks to tread the fine balance between achieving the highest returns possible with minimal risk. Brett is unafraid to take punchy, high-conviction calls on individual holdings within his fund. It currently yields 6.2%*.
*Source: FE Analytics. Correct on 28 March 2018.