Multi-managers: How we build our emerging markets exposure

Three top multi-managers reveal the blend of vehicles they use to get the best access to the emerging markets space.

Simon Wood, co-head of the multi-manager team at Scottish Widows Investment Partnership (SWIP)

Wood holds the £2.8bn Aberdeen Emerging Markets fund, managed by Devan Kaloo and the $93.8m IM Hexam Global Emerging Markets fund, managed by Bryan Collings and Grant Shotter.

Wood says together the funds give investors a wide balanced exposure to global emerging markets.

He says: “Aberdeen’s fund works well in downside markets, but we get good upside from Hexam. Neither of the funds are constrained, so rather than being just focused on, say India, they give the investor more freedom.”

Differentiation of fund styles is also important, he says.

“We don’t want two managers doing the same thing. If managers are doing the same thing and the funds are doing well then performance is fantastic, but if they are not then your performance can be disastrous.”

A fund Wood does not currently hold, but is interested in taking on, is the £704m First State Emerging Markets offering, managed by Jonathon Asante.

“It is our next choice if something goes wrong with Aberdeen,” he says. “It has a similar style to Aberdeen in that is has downside preservation characteristics.”

Wood says he would also use the fund to get exposure to Asia.

“We feel Aberdeen and First State have the strongest investment teams for Asian markets in the world,” he says. “They have a good past track record and the managers are very good at what they do.”

Fund performance

According to Morningstar, the Aberdeen fund has outperformed the IMA Global Emerging Markets sector over five years returning 113.59%, against a sector average of 57.46% and ranking 2nd in the sector.

Meanwhile, the Hexam vehicle, which was launched in February 2009, has returned – 15.82% over one year, compared to a sector average of – 2.83%.

The First State offering has also outperformed the sector over five years, returning 106.82%, against a sector average of 57.47%, ranking 4th altogether.

James Burns, investment manager for Smith and Williamson

Burns has a core holding in Devan Kaloo’s Aberdeen Emerging Markets fund, with two smaller positions in the £2.27bn HSBC Gif Brazil Equity fund, led by manager Jose Cuervo, and the $703m Atlantis China fund, managed by Yang Liu.

He says: “Investing in emerging markets is in theory higher risk, but Aberdeen is a fund with a steady pair of hands, which is why it is our core holding. Everything about the Aberdeen fund is slightly more defensive and we like the management team. We leave it to their expertise to decide the best place to go to get good exposure to emerging markets. 

We also like China and Brazil in terms of their macroeconomic story. Burns says the Aberdeen fund tends to do well when markets are down. It also complements the other funds by giving exposure to all the BRIC countries, with heavy weighting towards Brazil and China.