investing in emerging markets?

dunstonh

Emerging markets make up c.10% of global market cap so are you saying most investors would be underweight?

Yes.  The average UK consumer is cautious.  The majority sit between defensive and moderate risk. (crudely lets say 20-70% equity).    Adventurous investors would head towards 10-15% but most would be less than that.  Our absolute highest risk in our conventional scale was 14% this time last year but has fallen to 7.5% on the latest weightings.    

As we often say, there is no best way and a lot of it is opinion.

steampowered

The economies of emerging markets are likely to grow faster than the rest of the world. However, there are issues and risks with investing into emerging markets.

Stock market floats tend to be smaller. Corruption is much more prevalent. Corporate governance can be weak. Transaction costs are high as there are fewer large companies to invest in. 

It doesn't necessarily follow from the fact that (for example) the Indian economy is likely to grow that you should be investing in the Indian stock market.

Tolteca87

AlanP_2 said:

Tolteca87 said:

I put in the majority of my pension funds in emerging market ITs in my 20's. The funds valuations now mean I will be able to retire.

So, depends on your timeframe and a chose fund rather than single stocks if you don't know what you're doing re single stocks.

Great, but are you 32 or 92, and when will you be able to retire?

Mid 50s and soon able to press the button to take pension benefits if I want.

aroominyork

dunstonh said:

Emerging markets make up c.10% of global market cap so are you saying most investors would be underweight?

Yes.  The average UK consumer is cautious.  The majority sit between defensive and moderate risk. (crudely lets say 20-70% equity).    Adventurous investors would head towards 10-15% but most would be less than that.  Our absolute highest risk in our conventional scale was 14% this time last year but has fallen to 7.5% on the latest weightings.    

As we often say, there is no best way and a lot of it is opinion.

Would you satisfy my curiosity and divulge the proportion of your personal investments that are in emerging markets? Are you as cautious as your clients - or perhaps need to be seen to invest in your own products and so have less flexibility?

dunstonh

aroominyork said:

dunstonh said:

Emerging markets make up c.10% of global market cap so are you saying most investors would be underweight?

Yes.  The average UK consumer is cautious.  The majority sit between defensive and moderate risk. (crudely lets say 20-70% equity).    Adventurous investors would head towards 10-15% but most would be less than that.  Our absolute highest risk in our conventional scale was 14% this time last year but has fallen to 7.5% on the latest weightings.    

As we often say, there is no best way and a lot of it is opinion.

Would you satisfy my curiosity and divulge the proportion of your personal investments that are in emerging markets? Are you as cautious as your clients - or perhaps need to be seen to invest in your own products and so have less flexibility?

I have 3.5% allocated to EM.  I invest in a moderate to adventurous spread.
I actually did a review of the risk profiles for our firm across the advisers a couple of weeks ago and found the spread was where I would expect it to be except for one adviser that had more cautious spreads that I would expect (without background knowledge).  When looked at more closely, he had a much higher spread of at-retirement clients using drawdown.  So,  that explained the lower risk spread he had.
One thing an adviser should never do is let how they would invest influence a client.

aroominyork

dunstonh said:

aroominyork said:

dunstonh said:

Emerging markets make up c.10% of global market cap so are you saying most investors would be underweight?

Yes.  The average UK consumer is cautious.  The majority sit between defensive and moderate risk. (crudely lets say 20-70% equity).    Adventurous investors would head towards 10-15% but most would be less than that.  Our absolute highest risk in our conventional scale was 14% this time last year but has fallen to 7.5% on the latest weightings.    

As we often say, there is no best way and a lot of it is opinion.

Would you satisfy my curiosity and divulge the proportion of your personal investments that are in emerging markets? Are you as cautious as your clients - or perhaps need to be seen to invest in your own products and so have less flexibility?

I have 3.5% allocated to EM.  I invest in a moderate to adventurous spread.
I actually did a review of the risk profiles for our firm across the advisers a couple of weeks ago and found the spread was where I would expect it to be except for one adviser that had more cautious spreads that I would expect (without background knowledge).  When looked at more closely, he had a much higher spread of at-retirement clients using drawdown.  So,  that explained the lower risk spread he had.
One thing an adviser should never do is let how they would invest influence a client.

Yet the adviser's clients can influence him! 

dunstonh

aroominyork said:

dunstonh said:

aroominyork said:

dunstonh said:

Emerging markets make up c.10% of global market cap so are you saying most investors would be underweight?

Yes.  The average UK consumer is cautious.  The majority sit between defensive and moderate risk. (crudely lets say 20-70% equity).    Adventurous investors would head towards 10-15% but most would be less than that.  Our absolute highest risk in our conventional scale was 14% this time last year but has fallen to 7.5% on the latest weightings.    

As we often say, there is no best way and a lot of it is opinion.

Would you satisfy my curiosity and divulge the proportion of your personal investments that are in emerging markets? Are you as cautious as your clients - or perhaps need to be seen to invest in your own products and so have less flexibility?

I have 3.5% allocated to EM.  I invest in a moderate to adventurous spread.
I actually did a review of the risk profiles for our firm across the advisers a couple of weeks ago and found the spread was where I would expect it to be except for one adviser that had more cautious spreads that I would expect (without background knowledge).  When looked at more closely, he had a much higher spread of at-retirement clients using drawdown.  So,  that explained the lower risk spread he had.
One thing an adviser should never do is let how they would invest influence a client.

Yet the adviser's clients can influence him! 

I think you have misunderstood.   Periodically, we check how the advisers rate their clients and look at it at adviser level against firm-level and general ballpark expectation.   Just a compliance thing to make sure risk profiling is personalised and not using the same for everyone or letting bias show.   We were not checking the individual adviser's personal risk profile.   
Broadly speaking you expect most investors to fall within cautious to moderate risk.   Then a smaller number as moderate to adventurous with the smallest numbers in defensive and then adventurous.     If you find an adviser's overall spread is significantly outside of that expectation you look deeper.     

eastmidsaver

hi, thanks for all your responses.
i think maybe my wording was not too accurate, but yes my aim is to keep it in there longer term (not for a couple of years)... i'd only look to withdraw if i needed to. it is less than 10% of my overall portfolio which is in the S&S ISA, and i did do some research on it before making the investment.
somebody asked me which fund have i invested in.....  it is the JPM Emerging Markets fund.   they do seem to have a pretty good track record in this sector,  but we all know "past performance is not an indicator of future returns".
on a seperate matter, i have also invested in an Asian Fund via my SIPP,  as that is a very long term investment, and that way I can't be tempted to access it until i am closer to retirement.
to the poster who invested in EM markets in their 20's and is now able to retire.... congratulations, and I hope you enjoy it.

Thrugelmir

aroominyork said:

dunstonh said:

i have recently put in £750 into an EM fund,  at one point it was about £75 up,  now it is about £30 down  .  This tells me it is quite a volatile sector?

One of the most volatile you can get.  Typically most investors would only have single digit allocations to emerging markets.

 just as I am significantly underweight US since I do not want something like 60% in any one region.

Unless you hold US mid and small caps then you will unlikely to be that exposed. 

aroominyork

dunstonh said:

aroominyork said:

dunstonh said:

aroominyork said:

dunstonh said:

Emerging markets make up c.10% of global market cap so are you saying most investors would be underweight?

Yes.  The average UK consumer is cautious.  The majority sit between defensive and moderate risk. (crudely lets say 20-70% equity).    Adventurous investors would head towards 10-15% but most would be less than that.  Our absolute highest risk in our conventional scale was 14% this time last year but has fallen to 7.5% on the latest weightings.    

As we often say, there is no best way and a lot of it is opinion.

Would you satisfy my curiosity and divulge the proportion of your personal investments that are in emerging markets? Are you as cautious as your clients - or perhaps need to be seen to invest in your own products and so have less flexibility?

I have 3.5% allocated to EM.  I invest in a moderate to adventurous spread.
I actually did a review of the risk profiles for our firm across the advisers a couple of weeks ago and found the spread was where I would expect it to be except for one adviser that had more cautious spreads that I would expect (without background knowledge).  When looked at more closely, he had a much higher spread of at-retirement clients using drawdown.  So,  that explained the lower risk spread he had.
One thing an adviser should never do is let how they would invest influence a client.

Yet the adviser's clients can influence him! 

I think you have misunderstood.   Periodically, we check how the advisers rate their clients and look at it at adviser level against firm-level and general ballpark expectation.   Just a compliance thing to make sure risk profiling is personalised and not using the same for everyone or letting bias show.   We were not checking the individual adviser's personal risk profile.   
Broadly speaking you expect most investors to fall within cautious to moderate risk.   Then a smaller number as moderate to adventurous with the smallest numbers in defensive and then adventurous.     If you find an adviser's overall spread is significantly outside of that expectation you look deeper.     

Maybe I did misunderstand. I was asking about how you invest your own money - not how you invest for your clients. I wondered if you are as cautious with your own money as your clients want you to be with theirs.

Thrugelmir said:

aroominyork said:

dunstonh said:

i have recently put in £750 into an EM fund,  at one point it was about £75 up,  now it is about £30 down  .  This tells me it is quite a volatile sector?

One of the most volatile you can get.  Typically most investors would only have single digit allocations to emerging markets.

 just as I am significantly underweight US since I do not want something like 60% in any one region.

Unless you hold US mid and small caps then you will unlikely to be that exposed. 

I don't understand this. A global tracker has 55%-60% invested in the US. Is your point that they earn revenues overseas or are foreign companies listed on Wall St.? If so, I don't think that makes you immune to the sentiment which drives a London/New York/Tokyo market up or down.