The new fund aims for growth by investing in a concentrated portfolio of the management team’s best stock ideas. The portfolio will not be constrained by index weightings and will initially be overweight in Brazil, China and Russia.
Hexam managing partner Bryan Collings will run the fund alongside co-manager Grant Shotter. Collings joined Hexam, which was founded in 2006, from Baring Asset Management. He previously worked for Deutsche Asset Management.
Shotter, who has eight years investment experience, also joined Hexam from Baring Asset Management. He runs Hexam’s global resources absolute return fund.
With a universe of 850 emerging market stocks, the first step is to weed out those that are not liquid enough. Top down and bottom up analysis is combined while looking at five factors – growth, liquidity, management, currency and valuation.
The managers are interested in growth at a reasonable price within established emerging markets. They believe that growth potential is higher in emerging markets than developed markets and feel that buying opportunities are good because stocks have been over-sold by panicking investors.
Emerging markets have higher return potential than developed markets but some investors may not be able to stomach the high volatility. Emerging markets are also showing greater correlation with developed markets, but some regions are more correlated than others.
The boutique structure of this fund may be in its favours as it allows the managers to focus on the portfolio while Ignis takes care of the administration.