Four emerging market funds for the risk-tolerant investor

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.

We explain why we like emerging markets and identify some funds for your consideration:

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.

Four emerging market funds which we think could present themselves as good options for investors:

M&G Global Emerging Markets

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.

Lazard Emerging Markets

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.

M&G Emerging Markets Bond

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%*.

Aberdeen Emerging Markets Bond

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.

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.