Growth instead of value fails to benefit shareholders: M&G

Mr Godfrey, co-manager with Matthew Vaight of the £551m M&G Global Emerging Markets fund, said: “Management teams are increasingly aware of the need to create value for shareholders rather than indulging in the blind pursuit of growth. Growth is of no benefit to shareholders unless that growth is value-creating.

“Contrary to the common assumption that economic growth drives stock market performance in emerging markets, we believe that higher economic growth does not necessarily lead to higher stock market returns.

“What drives markets over the long term is companies and valuations, so we identify companies that can develop sustainable business strategies to efficiently capture economic growth and create value for shareholders.”

His comments came on the third anniversary of the fund, which launched on 5 February 2009.

Since launch, according to data from Morningstar, the fund has returned 103.4 per cent, outperforming the benchmark MSCI Emerging Markets Index, which returned 88.7 per cent. It also beat the 87.3 per cent average return for the Morningstar Global Emerging Markets sector.

Co-manager Mr Vaight said: “Emerging markets remain particularly favourable to active investors as markets are less efficient and many indices are dominated by large state-owned companies that are not necessarily run in the best interests of minority shareholders.”

James Norton, director for London-based Evolve Financial Planning, said: “Emerging markets should be part of a balanced portfolio, leading to long-term growth.

“M&G’s performance is good, but three years is a short time frame over which to measure it.”