Emerging market equities are expected to offer the most in the way of investment opportunities over the next 12 months, outpacing the US, UK, Asian and European equities.
According to a Baring Asset Management study, which surveyed 120 IFAs during May, half of the advisers said emerging market equities would offer the best equity investment opportunities, compared to a quarter for US equities.
The poll found a third of the advisers currently favoured emerging market equities, while almost a fifth are looking to increase exposure to the asset class.
However Simon Jagger, head of UK wholesale distribution at Barings, said there still appears to be a degree of caution about the sector, as a higher proportion of advisers planned to increase their exposure to absolute return, developed market equities, and multi-asset growth funds.
He said: “Emerging markets have become much more interesting again and we firmly believe that emerging markets should be a core holding in a risk-adjusted portfolio.”
Philippe Ithurbide, global head of research at Amundi, recently said portfolios which are underweight in emerging markets “have had their reasons”, but that investors should gradually return to the sector.
Mr Jagger said Barings sees “significant” buying opportunities across the emerging market landscape, pointing to companies such as Taiwan Semiconductor, Alibaba, and Yandex.
He added: “With a degree of nervousness globally, we think that the Federal Reserve will be more dovish, which will be good for a stable US dollar and, in our view, good for emerging markets.
“Significant numbers of financial advisers are clearly recognising the attractions of emerging market equities in terms of growth opportunities and we expect to see demand increase across the rest of this year.”
Simon Torry, chartered financial planner at SRC Wealth Management, said: “Trying to pick a sector that will outperform is, in our opinion, a risky strategy.
“In a global economy where literally anything could happen, what may seem like a good place to invest today can quickly turn out to be a disaster.”
While he said it was important to diversify portfolios, he added: “If pushed, however, we would have to say that in a uncertain world it’s hard to bet against the US economy.”
katherine.denham@ft.com
