Fund
groups that sell cross-border benefited most from the resurgent
European appetite for emerging-markets funds in evidence in the first
half of 2009, according to new report from the research group Lipper
released on 28 August. Cross-border groups booked €12bn from record
emerging-market fund net sales of €15bn in the first six months of 2009
with JP Morgan, Barclays and Société Générale leading the field.
As
investors begin once more to dare to utter the ‘d’ word (decoupling),
Lipper suggests emerging markets could have much further to run, given
that 80% of the world’s population live in emerging markets but they
account for just 10% of global equity market capitalisation.
“Although
the question of whether emerging markets have decoupled from the
developed world remains a matter of debate, many investors believe
there are good reasons to invest anyway, such as the emerging
economies’ relatively young population and abundance of commodities,”
the research firm says.
At the moment, it is estimated that the
majority of investors in the developed world only have around 5%
emerging markets exposure in their portfolios, according to Lipper.
Some fund managers argue this should be much higher because of the
emerging markets’ potential for growth.
But the danger of what
we might term ‘bipolar’ investing – an irrationally gloomy down
followed by a manic and slightly embarrassing high – is, of course,
ever present. There always seemed to be something slightly desperate
about the way people talked Russia up to the skies; now one sometimes
has the same uncomfortable feeling about China.
Lipper
acknowledges the risks, heading its report ‘A bubble in the making?’
However, the research firm appears convinced that sensible
diversification will help avoid an emerging-markets car crash.
“While
there are fears in some quarters that a bubble is developing,
particularly in China, the majority of European investors are spreading
their risk with broadly based emerging equity funds,” the Lipper report
says.
This is true: broad-based emerging-market equity funds
were the most popular sector, attracting net inflows of nearly €6.4bn.
However, the next most popular sector was single-country China funds
with net inflows of €4.9bn. Time will tell if it was a wise bet.
Fiona Rintoul, editorial director
©2009 funds europe
