Growth or value in emerging markets?

aroominyork

The knee jerk response is that since we wouldn't invest in dud economies and hence want to see EMs grow, the obvious tilt is towards growth. Of course it's not that simple but I'm not sure why. Please discuss.

Linton

In my view...

EM covers a wide range of very different economies.  I think one needs to distinguish between SE Asia, especially China, S Korea, and the rest.  How one handles China is problematic in that funds generally seem to restrict themselves to a limited range of companies. For example I would have thought that BYD should be of some interest but I have not seen it included in any mainstream fund. I think "the rest" are too small to be worth spending a lot of effort on.

EM tilt isnt necessarily towards growth.   The M&G EM fund is tilted towards Value whereas my other EM fund, Matthews SE Asia Smaller Companies, is 45% growth or there abouts but that is the nature of smaller companies.  The more developed EM countries can have rapidly developing consumer markets and financial sectors  whereas other than China and  S Korea growth may largely come from foreign registered companies.   EM investments are just part of a global portfolio and so should be compatible with ones overall strategy.

So  my preference is for a reasonable mixture with any tilt marginally towards value really as part of an attempt to keep growth wiithin constraints.  There are better opportunities elsewhere for growth.

I thought you were a committed index investor?

aroominyork

Linton said:

I thought you were a committed index investor?

I've moved more towards indexing but am still about 40% active, including a chunk of EMs. 

I've just seen there is an EM value factor ETF, EMVL. Over the last three years (yes, I know, I know...) it has risen 17.7% while an EM index fund has fallen 2.7%. I think I'll consign this issue to the "don't try to be too clever" bin.