In-Depth: Emerging Markets Equities

Here is a detailed look at fund selectors’ attitudes to emerging market equities. The overall picture is very positive.

– 2016 has been the year of emerging markets. Sentiment towards emerging markets equities picked up strongly at the start of the year and has maintained that trajectory ever since, with the number of those looking to reduce their weighting in the asset class dropping to almost nothing.

– There has been some variability between countries, but the overall picture is the same everywhere. The only place with a significant number of doubters is Belgium and even there they are overwhelmed by those wanting to buy more.

– With regard to flows for emerging markets equity funds, this positive attitude did not convert into fund sales on average until July this year, when suddenly there was a strong flood of money into the asset class.

We also gather style data, asking fund selectors whether they have a strong preference between large/small cap or value/growth.

It is important to remember that around a third of all respondents have no preference – so there is potential demand for all styles.

– When it comes to GEM, large cap dominates. That doesn’t mean to say that no one buys small-cap funds, but of the two-thirds of people who have a preference, the vast majority want

large cap.

– The only exception to this is Finland which has a trend-busting love of small cap GEM stocks.

– On the growth/value debate, fund selectors fall on the side of growth.

– The outliers are Luxembourg and Denmark where only a small number of people had a preference. Among those that did, 100% went for growth.

– On the other side, the only country that has more fans of value than growth in GEM investing is Norway, and even then the preference is only slight.