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First State Investments' Jonathan Asante's knowledge of emerging markets goes back much further than that of your average portfolio manager. His interest in the sector was tickled by his West African roots, owing to the fact that his father grew up in Ghana. Since childhood he has been intrigued by the economies of the developing world and after nearly 15 years of specialising in emerging markets, Mr Asante has been around long enough to bear witness to the sector's good, bad and downright ugly times.

Recently taking over the reigns from Angus Tulloch as lead portfolio manager of First State Investment's global emerging markets team, Mr Asante has the type of holistic, insightful take on markets, which only comes from years of experience, and as he does not squirm to admit, making mistakes.

When he first moved into the sector in 1995, the future of emerging markets looked dire. According to Mr Asante, his decision to leave a promising career in economics to pursue his passion for emerging markets was considered by many at the time as "career suicide" and as he admits for the first seven years following his entrance into the sector things remained pretty grim. After 2001 the tide turned and emerging markets propelled forwards both in performance and appeal. Now, it seems the seven fat years are over and the sector very much like Pharaoh's dream in the biblical tale, should brace itself for the possibility of some gaunt times ahead, as the emerging markets show indications of another major correction.

Does Mr Asante predict emerging markets to suffer another seven thin years? Not quite, but his background in economics and subsequent estrangement from the field has him reluctant to make a prediction.

After spending nine months in the economics department of NatWest when he first came to the City, Mr Asante decided to make a break away from the social science of supply and demand. This, despite having a masters qualification in economics and being on his way to completing his PhD. He explained: "I was an academic economist, or close to becoming one, and I realised that economists get paid lots of money to tell people what they think is going to happen in the future, but once you reach a certain level of understanding of economics - you realise that you actually have not got a clue.

"I think people employ economists because they want to believe that there is some sort of certainty in life - that there is someone who knows what is going to happen."

While Mr Asante may not be able to predict the future, he does expect things to get tougher for emerging markets. He said: "2008 has already been a tough year and I expect this to continue, firstly because interest rates will have to go up a lot, especially in Asia, which is usually very bad for stock markets and secondly, emerging markets have had a very strong performance for each of the last five years, including last year, which has resulted in valuations being set at very optimistic levels, and not the pessimistic scenario that is currently playing out before us."

Mr Asante's view is that in the past few years far too much optimism has been generated around emerging markets based on the idea that these countries could grow forever without having any sort of hiccups along the way. "There are always hiccups, as history has shown, and in this case the hiccup has been inflation," he added.

Mr Asante explained that inflation has become the biggest issue in developing economies. He said: "You can not have inflation running at between 10 and 15 per cent and interest rates running at 3 or 4 per cent. Interest rates have then to go up a long way and when this happens, growth slows."

Other 'hiccups' in the emerging market arena, according to Mr Asante, include factors such as political instability, government interference and factors which one has not even thought about, because as he puts it, "that is the very nature of emerging markets".

So being the lead manager of two emerging funds - the £533m Global Emerging Markets and £273 Global Emerging Market Leaders fund, how is Mr Asante himself battening down the hatches? He responded: "Our style tends to be quite defensive across Asia and other emerging markets - we aim to buy the more solid, 'boring' companies with steady cash flows and growth."

Mr Asante said that their focus has also been on buying more food retailers across their funds in Taiwan, Korea and China. He explained: "Food retailers tend to be quite defensive in terms of inflation because most governments usually do not interfere with them and because they have fixed costs, which is often property.

"We also have big positioning in gold across all our Asian and emerging market funds. In inflationary times, money loses it value in relation to all kinds of things but gold seems to be able to hold its value even when money is losing its. If there is huge distress out there, we hope that gold becomes an asset of choice."

Mr Asante points to the example of Vietnam, currently caught in the throes of a small economic crisis with stock markets falling by more than 60 per cent. "This is a country where people use gold instead of the local currency. There has been a huge increase in demand for gold in this financial crisis which is mainly due to the fact that gold holds it value."

While many have in the past pointed to China and India as the panacea for investors, Mr Asante said he has never believed that these two countries were bullet proof investment havens. He said: "People thought that China and India could grow unperturbed despite what happens in the US, however while this is most probably true, the problem is that their growth is so strong, that they have extreme levels of inflation."

So is emerging markets a bubble on the verge of bursting? Mr Asante responded: "While the whole of emerging markets in Asia was not a bubble, there certainly were selected bubbles - the first bubble was in the Vietnam stock market which has collapsed. The second bubble was in the Chinese mainland stock market, while India was also very close to bubble territory."

Following his stint at Natwest, Mr Asante spent 10 years working for Framlington, now Axa Framlington, after which he left to join First State in order work with Mr Tulloch, who in his words, "had the best reputation in the industry and hence I came to learn a few things off the great man". A few years down the line, Mr Asante has taken over from the '"great man", becoming joint deputy head of the Global Emerging Markets team. He has also learnt a few other things along the way and if emerging markets are indeed headed for tougher times, he is well armoured. "The sector had a crisis ten years ago, and we determined then which companies are the ones to stick it out with," he said.

In the last 15 years Mr Asante has also learnt the nature of the beast he deals with. He said: "As a fund manager you have to get used to making mistakes and things going against you - psychologically it is quite difficult and that is what all young fund managers often struggle with.

"Markets will always make you feel foolish, but it is how you deal with it that matters. It is inevitable that your ego takes a battering."

Maike Currie is deputy features editor for Financial Adviser

CV: Jonathan Asante

1993: Completed Masters degree from the London School of Economics

1994: Taught economics and studied towards PhD in the subject at London School of Economics

1995: Assistant Researcher, analysing the UK economy and UK credit markets, Natwest Group

1995 - 2004: Global Emerging Markets Fund Manager and Group Economist, Framlington (now Axa Framlington)

2 004 - 2006: Senior Analyst on First State Investments’ Global Emerging Markets team

2006 - presently: Deputy Head of Global Emerging Markets, First State Investments