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Interesting times

At least I know what I won’t be writing about this week. I fear I may have mentioned a Bristol-based firm of advisers a shade too often of late – and while two columns in a row might reasonably be dismissed as coincidence, three looks like the journalistic equivalent of stalking.

What I will be writing about, however, is more problematic – albeit in a good way – because it has been an interesting couple of days. For a start, there was the round table marking the 20th anniversary of the launch of Templeton emerging markets investment trust, complete with birthday cake although no Brazilians, Russians or anyone else jumping out of it, which felt like a trick missed.

Mark Mobius, the fund’s steward for the full two decades, highlighted the present unusually high growth rate in M1 money supply and the potential mayhem that the trillions of dollars worth of derivatives still sloshing around the system could cause.

Commenting on the consequences that these two metaphorical elephants could have on the equally metaphorical emerging markets’ room, he said: “Be ready for volatility but be confident the markets will continue to move upwards as the supply of money increases.”

There were plenty more insights but since I am curr-ently supposed to be writing a book on emerging markets investing, I suspect this is a subject to which we will return a number of times over the coming months – and we have already had to curb our stalking once today.

Instead, let us dwell on the rather good asset allocation debate I attended while at this year’s Sifa conference, where four of the great and/or good of fund management were invited to try and change the audience’s thoughts on appropriate weightings for UK equities, emerging markets equities, global equities and corporate bonds.

Perhaps the organisers should have stressed to Adrian Frost that, to win the bottle of champagne on offer to the expert who achieved the biggest swing, the audience was supposed to feel moved to increase rather than decrease their weighting because the Artemis income manager was characteristically honest.

That said, having started off his presentation by admitting he was not at all confident of retaining his recently won Pessimist of the Year award, he did point out the nice thing about the UK equity market was that it was fairly mature, had solid defensive characteristics and its companies enjoyed good cashflows I think two members of the 100-plus audience said they were now planning to up their allocation to this area.

For his part, M&G’s bond supremo Richard Woolnough argued that credit risk is the most attractive it has ever been. However, he had to concede that, while bond investors were being paid a lot of money to take risk, that also held true for equities and indeed Craig Heron, championing global equities, argued that they were cheap, particularly in the event of an economic recovery.

They also offered some “fantastic opportunities” in volatile market conditions, added the Henderson New Star multi-manager, before going on to express the opinion – hold the front page – that in all of this diversification might very well be the key.

Charged with boosting the collective allocation to emer-ging markets beyond 2 per cent, Richard Evans of Martin Currie must have been tasting the champagne already. Increasing domestic demand, accelerating growth for the strongest consumer franchises, a shake-out in the export space and consequent upside for the survivors and short-term refla-tion-oriented opportunities were all welcomed onstage and asked in turn to take a bow.

“It’s time to treat Asia as a ‘decade opportunity’,” he finished triumphantly. “There’s a big shift coming.” There was also a big bottle of fizz coming the way of Mr Evans and, really, it was hard to argue on a medium-term view.

Mind you, as I suggested later to Mr Frost, I was a little surprised the audience had been so shy of emerging markets in the run-up to their recent rally and so readily swayed just in time for the quick and dirty sell-off that must now almost invariably follow. “I thought the biggest cynic in the room might say something like that,” he replied. Adrian Frost calling me a cynic? I almost blushed with pride.

Julian Marr is editorial director of marketing-hub.co.uk

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