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Adviser Fund Index

The Adviser Fund Index aggressive portfolio has had an impressive six months. The horror of the end of 2008 is receding and the index is pulling away from the performance of the Investment Management Association active managed sector and the Association of Private Client Investment Managers growth portfolio. One major reason for this is the phenomenal performance of the emerging market sector.

In particular, the past three months saw outstanding growth. In the four months after the bottom in March, the FTSE emerging all-cap index gained more than 60 per cent and peaked last month with a gain of almost 70 per cent.

As a result, in the past six months, funds from this sector made up seven of the 10 best-performing funds in both the aggressive and balanced indices, and five of the 10 best performers in the cautious index.

Retail investors have seen the potential. The latest IMA figures indicated a surge in these funds in May as global emerging markets saw a net inflow of £77.5m. This contrasted dramatically with the April figures which posted a net outflow of £243m – the biggest monthly net sales for the sector since October 2007.

The panellists did not join this flood with the rebalancing in May. Most took a long-term view to gaining exposure to emerging markets and already had funds in their portfolios.

Chelsea Financial Services managing director Darius McDermott has not altered his allocation to emerging markets since May 2008. He points out that growth in these markets is a long-term story rather than a tactical allocation.

He says: “Emerging markets are gradually growing as a proportion of the market cap of the overall world market and it makes sense to be exposed to that growth story.”

Bluefin Wealth Management director of investments Ian Shipway adds: “There is a massive transfer of wealth from West to East across the world which will lead to striking wealth creation in growing economies.

“It is an argument we have been convinced about for a while, so we have a strategic long-term holding.”

McDermott holds one emerging markets fund in the balanced portfolio, with a 4 per cent weighting in Allianz RCM bric stars. He also holds 10 per cent of the aggressive portfolio in this fund and 10 per cent in Lazard emerging markets.

Meanwhile, Shipway gets exposure passively through the dimensional emerging markets core equity fund.

Whitechurch Securities investment manager Ben Willis has 10 per cent of the aggressive portfolio in Lazard emerging markets, 10 per cent in Gartmore China and 10 per cent in First State Asia Pacific, which has some exposure to emerging markets. He also has 10 per cent of the balanced portfolio in Allianz RCM bric stars.

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