The firm says emerging markets was the best performing IMA sector in 2009 but expects it to have a tougher 2010 when the dollar rebounds. This will impact on emerging markets and commodities as investors shift towards the US.
The multi-manager has cut emerging markets exposure by 3.4 per cent since January to 16.8 per cent. This represents a slight underweight relative to a 17.5 per cent benchmark weighting and contrasts with the overweight position it had in January.
T. Bailey head of marketing and communications Philippa Gee says: “We are expecting a fight-back from the dollar in 2010 and historically that has been bad news for emerging markets. The sector had a great 2009 – on average funds in the IMA Global Emerging Markets sector grew by 58 per cent. That was a big factor in the success of the T. Bailey growth fund last year, but we think the party is ending.
“We’re expecting a correction in emerging markets this year, at which point it may be a good opportunity to reinvest. Long term we’re still fans, we just think it’s become overheated.”
Gee says the funds also have a 2.2 per cent overweight position in Japan relative to a 7.5 per cent benchmark weighting.
She says: “Japan was the poorest performing IMA sector last year but we think the moves we’re seeing in the Japanese economy look encouraging and may herald something of a long-awaited revival in the Japanese market.”