Editorial: Never mind the Brics...
The stop-start emergence of developing economies and the investment industry that seeks to profit from their growth provides another measure of just how far from the pack a pension fund investor is prepared to stray.
In a soon-to-be published book on emerging markets, EMD veteran Jerome Booth – formerly of specialist fund manager Ashmore – will criticise the slow speed at which the investor herd is reducing its bias towards developed economies.
He goes so far as to call for the establishment of a regulatory principle that an investment fiduciary that has made losses should not be able to claim that they were doing the same as everybody else.
At face value, that defence doesn’t sound like it would hold much water in the current environment. But should pension funds be waking up to these so-called ‘agency problems’ and breaking the mould by moving more aggressively into this volatile financial region?
Illustration by Ben Jennings
Other investors warn against moving ahead of the market based on a theoretical notion of where the global economy is heading. Ultimately it is a conviction call, and quite an important one.
We have looked at where value is currently being seen by 20 leading fund managers, and visualised what that new investment journey could look like.
It is clear that EM currency, equity and debt represent three different strategies for investors seeking less correlated growth.
But it is also clear that the volatility of EMD cannot be understood but against the fortunes of its two more jumpy counterparts, as developed markets gradually turn off the quantitative easing taps.
The second part of our survey, to be published next week, will reflect the scale of the losses made by UK pension funds in 2013 – a trend which has continued this year – but also the value of the investment over the past five years.
It will also weigh up the main risks worrying fund managers when it comes to emerging markets. We hope it informs any decision you choose to make.
Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.