Large pension plan managers are both looking to add to the large Blue Chip companies as a source of stability and reliable dividends to help the portfolios grow. They also like this asset class as valuations are very low and the upside potential of the equities is very attractive at this point. With a focus on these Blue Chip companies, which focus on emerging market consumption and growth, they believe portfolio values will be more stable than the global markets but with much better upside. The Excel Blue Chip Emerging Markets Fund is exactly that, an offering that focuses on the familiar and well capitalized companies. It’s a more stable less volatile fund in the current market conditions but with strong upside and a long future.
Outside the large Blue Chip names, these Strategists are finding much better risk return opportunities in emerging market equities. They are not excited about the anemic growth out of the USA or the negative trending growth from the European zone. Sadiq Aditia highlights that everyone is concerned about the slowdown in China, but even at 6% expansion this is 3 times greater than that of Canada. He also brings into question the perception of emerging markets, are they riskier than the Eurozone and which of these areas has the greatest upside potential?
Even if Asia grew at 5% for the next 5 years this would represent tremendous growth in the economy and at some point markets will have to start correlating with the stock markets as well. There is every reason to believe that we are going to see significant recovery out of the emerging markets and the questions for most is how to play this, whether through the Excel BRIC Fund, the Excel Emerging Markets Fund or by picking an individual zone that we have available.
Although both Aditia and Boyda are positive on the income story they do take slightly different approaches to emerging market debt. They both agree that one of their favourite asset classes is high yield and emerging market debt. They believe you can benefit from the emerging markets need for capital as emerging market countries and corporations issue debt to create even more growth and development in their countries. From what these strategists say, you can see that this is a very attractive asset class but you need to have the right manager and the right strategy in place.
The Excel EM High Income or Capital Income Fund (tax efficient offering) offer clients the best of both worlds, exposure to the sovereign and corporate debt of the developing markets run by a great team that has been able to add value to investor’s year in and year out.
Written by Brad H. – Excel Funds