Two emerging market funds have been added to MAM Funds’ Midas balanced growth fund, reflecting the managers’ focus on real returns above inflation.
It has introduced the UBS emerging market equity income and Fidelity emerging market inflation-linked bond funds to Midas balanced growth, which is up by 6.4 per cent in the year to date.
Despite investing in different asset classes within emerging markets, the funds both tie in with the MAM focus on returns above inflation through the theme of bankable returns.
Midas balanced growth has a three-pronged approach to each of the three types of assets in which it invests – equities, fixed interest and alternative assets. As well as bankable returns, fixed interest uses themes of inflation protection and creditors versus debtors.
The firm believes income plays an increasingly important role in producing total returns in the low-growth environment, pointing out that around 45 per cent of returns from Asia come from dividends. The team would previously have focused on bringing emerging market growth funds into the portfolio, with less of an emphasis on income funds, but it is now looking at a 50/50 split between the two. It is also taking a similar approach with its allocations to Europe and the US.
The UBS fund aims for income and growth by investing in high-yield equities across global emerging markets and provides a solution for MAM Funds in getting the right balance between growth and income funds in its allocation to emerging markets.
As well as bankable returns and emerging market exposure, Fidelity emerging market inflation-linked bond fund brings inflation protection into Midas balanced growth by investing in local currency government bonds in Latin America, the Middle East, Eastern Europe and Asia.
MAM Funds’ fund manager Simon Callow says: “It took us quite a while to find an inflation-linked emerging markets bond fund, but we did find one from Fidelity, which gives us useful exposure.”