Michael Konstantinov has refocused his Allianz RCM Bric Stars fund towards its core countries, Brazil, Russia, India and China.
Nearly the entire portfolio, or 99.6 per cent, of his £921m fund is now invested in the Bric countries and outlying regions Ukraine and Hong Kong, up from 81.5 per cent in May last year.
According to the fund’s mandate, Konstantinov can invest up to 30 per cent of the fund in non-Bric countries.
Goldman Sachs, which coined the Bric term, on the other hand, said earlier this week it was “not as tactically positive” on the Brics as it had been in the past.
The investment bank also issued a short-term alert on China and India, amid fears of soaring inflation and overheating of the economies.
Tim Moe, the chief Asia Pacific strategist at Goldman Sachs, says it “may have held on too long” to its overweight position in China last year.
The team has tactically reduced its weight as it no longer considers Asia as being in the “sweet part of the [business] cycle”.
While Goldman Sachs is increasingly looking to emerging markets outside the Bric bloc, Konstantinov has dropped most of his non-Bric countries, including Japan, the Netherlands and South Africa.
“If we look at the emerging market universe, the Bric countries are the most interesting ones from a risk/return point of view,” Konstantinov says. “Opportunities and valuation, especially in the mid and large cap space, are vast and attractive.”
Konstantinov holds 22.2 per cent in China and Hong Kong, 31.4 per cent in Russia and the Ukraine, 26.4 per cent in Brazil and 19.8 per cent in India. The fund’s benchmark weights all four countries equally.
When making investment decisions, Konstantinov says stock-specific factors have a two-thirds weighting while top-down factors have a one-third weighting.
On a sector level, he is positive on healthcare and materials and added roughly 5 percentage points each between May and November to financials and industrials. However, he is negative on energy, telecoms and utilities.
The fund’s biggest overweight on a stock level is Sberbank of Russia on 5.3 per cent, more than 2 percentage points more than the index weighting. Konstantinov added to Sberbank as part of his recent portfolio moves.