Global Active Emerging Market vs Segmented investing
Posted: Mon Sep 29, 2003 12:29 am
For UK investors, indexing EM equity is not yet possible. It's 5% load and 1.76% mgmt fee or ignore the asset class entirely.
There are global emerging market actively managed funds and there are ones that focus solely on Latin America, Eastern Europe, Asia, Indian Sub-continent etc. At first I thought buying a fund or two in each sub-set of EM would be better, how can one fund manager or team be expected to know all countries & markets well enough to specialise effectively. It turns out that might not be the case, the global EM equity funds have and do exercise the option where to not invest so much as where to invest on a country to country, stock to stock basis. This may be an advantage, instead of taking an equal investment in each sub-set of EM and being stuck for 5 years with Latin America when it's doing poorly, but equally they may miss opportunities. EM more than perhaps any other equity market seems to offer a lot of opportunities for actively managed investments to outperform the index due to the volatility and lesser EMT effects, while EM index return has been mostly flat the past few years overall, a large majority of actively managed funds delivered returns several points above the index outperforming in a way few US or UK actively managed funds are able.
I'm aware most here invest by indexing in EAFE & EM via Vanguard, but if you were having to invest actively or not at all, what approach would you take and why? Note: All funds carry pretty much the same fee structure.
Thanks,
Petey
There are global emerging market actively managed funds and there are ones that focus solely on Latin America, Eastern Europe, Asia, Indian Sub-continent etc. At first I thought buying a fund or two in each sub-set of EM would be better, how can one fund manager or team be expected to know all countries & markets well enough to specialise effectively. It turns out that might not be the case, the global EM equity funds have and do exercise the option where to not invest so much as where to invest on a country to country, stock to stock basis. This may be an advantage, instead of taking an equal investment in each sub-set of EM and being stuck for 5 years with Latin America when it's doing poorly, but equally they may miss opportunities. EM more than perhaps any other equity market seems to offer a lot of opportunities for actively managed investments to outperform the index due to the volatility and lesser EMT effects, while EM index return has been mostly flat the past few years overall, a large majority of actively managed funds delivered returns several points above the index outperforming in a way few US or UK actively managed funds are able.
I'm aware most here invest by indexing in EAFE & EM via Vanguard, but if you were having to invest actively or not at all, what approach would you take and why? Note: All funds carry pretty much the same fee structure.
Thanks,
Petey