Talking Point  

Advisers prefer to get EM exposure via direct funds

 Advisers prefer to get EM exposure via direct funds

A large majority of advisers wishing to provide their clients with exposure to emerging market assets prefer to invest directly in such funds, rather than choose a global equity fund which contains a variable amount of emerging market holdings, according to FTAdviser’s latest poll.

The poll, which was conducted via Twitter, showed that 68 per cent of respondents prefer to own direct Emerging Market funds on behalf of clients, compared with the 32 per cent who prefer to own global funds as a way to gain exposure to emerging markets.

Emerging market assets have historically performed well when US interest rates are low. This is because the income available from a US government bond, known as a Treasury Bill, is considered by the market to be the lowest risk asset in the world, while emerging markets are considered to be among the highest risk assets, so if the yield on the low risk asset rises, the attractiveness of higher risk assets is diminished. 

 

 

In addition, many emerging market companies and countries borrow in dollars, and lower interest rates make the cost of this debt cheaper, leavinbg more capital available for dividends or business expansion. 

david.thorpe@ft.com