Product review: Lombard Odier Emerging Consumer fund

Swiss private bank Lombard Odier has brought its emerging markets fund that capitalises on the growing middles classes in these countries to the UK.

The Lombard Odier Investment Managers Emerging Consumer fund was originally launched in Switzerland in October 2011 but a UK-registered version is now available.

It focuses on the consumption patterns associated with the growing middle classes in emerging economies located in Asia, Africa and Latin America. It will invest primarily in global listed equities in the retail and consumer sectors.

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Lombard’s emerging consumer team, consisting of four people, will take a particular interest in restaurants, food retailers, beer and spirits, food product and luxury goods.

While the fund is mainly a long-only equity strategy, it has the flexibility to hold cash and options in order to ensure it can produce an absolute return.

Mr Rabattu says his management team adapts its thematic research to the macro environment of the day and their strict risk approach that is always worried about how much money might be lost, how its positions are weighted and what effect currencies are having on the fund.

As at 31 October 2012 the one-year-old Swiss fund had assets of more than £300m under management.

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Back in the old days, investing in emerging markets meant investing in companies that were, for the most part, manufacturing goods for export or providing services to developed markets. Think textiles, computer factories and even call centre operators.

Things have changed. As these markets grew and more people moved from their rural surroundings to the built-up cities where they lived and worked each day, their disposable income went up and so too their aspirations.

As these new city-dwellers adopted Western habits, in terms of both the clothes they wear and the food they eat, an entirely new market developed in countries like China, Indonesia and India to meet their demands by providing them with consumer goods. Because of the stagnant economic conditions in Europe, one of the the biggest trading partners with emerging markets, exports out of these countries have been moving slower than in the past. But consumption among the middle classes is on the upswing and that is where the real growth story for this fund lies.

For investors who are seeking the latest growth trend but also want a long-term asset, this play on the burgeoning middle classes in emerging markets countries might be just the sort of thing. During the year to the end of October 2012 the fund returned more than 16 per cent. Like any investment with potentially high returns, it comes with a bit more risk than normal.