Emerging markets funds

aroominyork

I am looking for an actively managed emerging markets fund for my portfolio. Most of my EM exposure is in Stewart Investors Asia Pacific Sustainability which I am happy with as a good, low volatility fund, but I want to add more geographic breadth and a little more risk. I plan to be overweight EM, divided between Stewart Investors and one other fund. I am down to a shortlist of two: Vanguard Global Emerging Markets and Blackrock Emerging Markets. Vanguard uses three external three fund managers (Baillie Gifford for growth, others for value and core).

Morningstar shows that Blackrock has less giant cap and more large cap than Vanguard, and more importantly has Blackrock as growth style (in its 3x3 box) and Vanguard as value. That seems borne out by the tables below which show much greater historical growth at Blackrock.

Two things stand out for me. First, Vanguard has performed nearly as well over the last 3.5 years (I know it’s a short time period but Vanguard’s is a new fund) which might suggest their value stock picking has been effective in a predominantly growth environment, and if value becomes more ‘fashionable’ Vanguard might do well. Second, given the historical disparity in growth, the long-term projected earnings seem surprisingly similar.

I would really welcome others' views. Thanks.

BLACKROCK EMERGING MARKETS
[FONT=&quot]Long-Term Projected Earnings Growth[/FONT]
[FONT=&quot]8.57[/FONT]
[FONT=&quot]Historical Earnings Growth[/FONT]
[FONT=&quot]16.15[/FONT]
[FONT=&quot]Sales Growth[/FONT]
[FONT=&quot]12.86[/FONT]
[FONT=&quot]Cash-Flow Growth[/FONT]
[FONT=&quot]14.85[/FONT]
[FONT=&quot]Book-Value Growth[/FONT]
[FONT=&quot]8.06[/FONT]

[FONT=&quot]VANGUARD GLOBAL EMERGING MARKETS[/FONT]
[FONT=&quot]Long-Term Projected Earnings Growth[/FONT]
[FONT=&quot]7.97[/FONT]
[FONT=&quot]Historical Earnings Growth[/FONT]
[FONT=&quot]5.96[/FONT]
[FONT=&quot]Sales Growth[/FONT]
[FONT=&quot]2.69[/FONT]
[FONT=&quot]Cash-Flow Growth[/FONT]
[FONT=&quot]9.31[/FONT]
[FONT=&quot]Book-Value Growth[/FONT]
[FONT=&quot]2.93[/FONT]

jamei305

I own Baillie Gifford Emerging Markets Growth which having looked at again just now I still prefer to the two you listed - what were your criteria for shortlisting those two?

aroominyork

I used to own BG EM Growth along with various other BG funds before deciding their style was well suited to the last few years but might wane in other times. I chose those two EM funds for relatively low volatility and to complement Stewart Investors (which is >30% India) geographically.

AnotherJoe

If you have two that you cant choose between, just buy both. I ran two almost identical funds for 5 years or so simply because at the outset i couldn't decide between my two shortlisted and then realised I was getting analysis paralysis. As it happened they were within a gnats todger of each other when i finally had to sell one due to moving to a slightly different SIPP that only had one of them available.

Linton

You need to check the data carefully when comparing and choosing EM funds as the sector covers a wide range of underlying investments. Different funds may major on different areas. For example Liontrust is 21% Russia and 5% China. Vanguard is 32% China and 4% Russia. First State's largest holding is India.

aroominyork

Linton wrote: »

You need to check the data carefully when comparing and choosing EM funds as the sector covers a wide range of underlying investments. Different funds may major on different areas. For example Liontrust is 21% Russia and 5% China. Vanguard is 32% China and 4% Russia. First State's largest holding is India.

One of the reason for wanting a second fund is to get some China and other EM (eg Latin America) exposure to go alongside the Stewart Investors fund.

Still hoping for some comments on the growth/value analysis...

Linton

aroominyork wrote: »

One of the reason for wanting a second fund is to get some China and other EM (eg Latin America) exposure to go alongside the Stewart Investors fund.

Still hoping for some comments on the growth/value analysis...

Sorry, but in my view 3.5 years is just noise during an unsettled period. I would base my decision on the asset allocation difference. Growth vs Value is a significant factor, so in the context of your portfolio as a whole which needs to be increased?

aroominyork

Linton wrote: »

Sorry, but in my view 3.5 years is just noise during an unsettled period. I would base my decision on the asset allocation difference. Growth vs Value is a significant factor, so in the context of your portfolio as a whole which needs to be increased?

I agree 3.5 years isn’t long but, rightly or wrongly, I feel Vanguard are dipping their toes into active fund management in a planned and relatively cautious way which is especially important in emerging markets.

My portfolio as a whole is more growth than value. But if I want to balance that out surely I should do so across all regions rather than having growth in developed markets and value in emerging?

ArchBair

I hold JP Morgan Emerging Markets IT which I'm wholly satisfied with. Have you looked at this option?

Linton

aroominyork wrote: »

.....

My portfolio as a whole is more growth than value. But if I want to balance that out surely I should do so across all regions rather than having growth in developed markets and value in emerging?

In the ideal world you might like to achieve your desired balance in each market. However it would likely require a very large number of focussed funds to do that especially as there are several other factors to be balanced as well. So I balance out the factors at the portfolio level. The object isnt really to achieve specific optimal allocations of each, but rather to ensure the portfolio isnt too skewed in any particular direction.

aroominyork

ArchBair wrote: »

I hold JP Morgan Emerging Markets IT which I'm wholly satisfied with. Have you looked at this option?

Too much India (c.20%) which as I explained above I already have plenty of. When I want a quick snapshot of funds I go to HL's website (to get what other people are paying for!) which shows the JPM fund is 3.76% China. Go the the factsheet and it is 38.1% China. I'm finding more and more that HL's site carries incorrect data.


Edit: I have just been reading about value vs. growth in emerging markets and found this article especially interesting and well argued https://www.mondrian.com/corporate_insights/value-investing-in-emerging-markets-and-its-long-term-prospects/