Emerging market funds provide diversified exposure to regions and countries such as China, Latin America, Russia and Africa. Most Rated Funds in this asset group have a global remit. This year regional specialists and debt funds have been included among the 13 Rated Funds and are listed accordingly, as well as a globally diversified fund that targets income.
Emerging markets often exhibit high growth rates, but they are vulnerable to risks such as political instability and corruption. Local companies are often in the early growth phase of their development, which contributes to higher volatility, but they can deliver stronger returns. These markets tend to do well in a climate of expanding global economic growth, but they suffer most when investor confidence weakens.
As with Rated Funds in the Asian equities asset group, good actively managed emerging market funds should be expected to beat passive index trackers over the medium to long term. That is because company and country prospects are less well-researched than in developed markets.
Our emerging market Rated Funds take a variety of investment approaches. Some look at the macroeconomic environment around the globe and prioritise companies operating in regions with the best economic or currency prospects.
Others take a thematic approach, by prioritising dividend and/or bond income, for example. Several look for high-quality companies that can grow their earnings in all types of market environment and mitigate many of the risks that can be present in emerging markets.