Sentiment around emerging market equities has improved notably over the past 18 months, but finding the best way to invest in developing world companies remains up for debate. It is a space where even the most cost-conscious of fund buyers tend to make the case for active management. But given the asset class’s reputation for volatility, selectors typically look to seasoned hands to pick stocks.
Glen Finegan – the former Stewart Investors man charged with leading Janus Henderson’s march into the emerging market arena – has spent more than 15 years as an emerging market specialist. Leaving Stewart in 2015 meant he became a figurehead for the first time, and presented a different challenge: trying to convince fund buyers that he could replicate his past success at a new firm.
Mr Finegan has carried the risk-conscious Stewart style across to Henderson. Having taken over a minimal amount of assets from the company’s former Gartmore team, his six-strong unit now manages more than $4bn (£2.9bn) in assets, including £472m in the firm’s retail fund. But the manager says he’s not a champion of the space, and although his career has been devoted to emerging markets, he remains wary.
“We’re not cheerleaders for this asset class – it is risky – so the only sensible approach is to invest accordingly,” he explains.
“It’s clear that the world’s population growth is in the developing world and that’s a powerful tailwind. But you have to think about the risks and rule of law, and shareholder protection. Too many portfolio managers become chief marketing officers for their asset class and that’s dangerous.
“We put capital preservation ahead of capital gain, so we come at investing from more of an absolute return approach. Historically, this has delivered relative outperformance when markets have been falling, [but] we will underperform when emerging markets are in fashion and there is an element of momentum. The moment people get excited, we tend not to be there.”
So how did Mr Finegan, only midway through his career and having spent time in Singapore with Stewart Investors, find himself in Edinburgh building a new franchise?
His career began as an engineer working in the oil industry covering countries such as Nigeria, Egypt and even Azerbaijan – an aspect which he claims gave him “a taste for the developing world”. Itchy feet swiftly followed: “Engineering school wasn’t very good at communicating the world outside engineering,” he says.
Having already begun investing as a personal pastime, he then started encountering investment professionals outside of work. “It occurred to me they were doing for their job what I was doing for my hobby. It became obvious that maybe following the engineering route wasn’t for me.”
A short period later in 2001 Mr Finegan became an analyst at what is now Stewart Investors, under the guise of Asia-Pacific veteran Angus Tulloch.
“I was lucky enough to get a job with someone who was such a good investor,” he says. “You need a good apprenticeship in this industry and there are very few great investors around. Over that time I learned from Angus and the team about turning my hobby into a profession.”