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EM troubles: two equity managers navigating the market

Emerging markets are living up to their reputation for boom and bust. Here are two fund managers who have seen it all before.

Over the years, wealth managers have been able to predict only one thing about emerging markets: constant change.

China’s growing clout in the tech sector is just the latest example of the rapid boom-and-bust growth pattern that characterises the market.

Some investors feel that the sector holds too much risk, while others think compelling fundamentals make emerging markets a sure bet in the long run.

Both of these streams of thought hold true, albeit at different times.

While 2017 proved to be a lucky year for emerging markets, with fund managers rediscovering their enthusiasm for the sector, 2018 so far has brought a sell-off, the collapse of the Turkish and Argentinian currencies and threats of a trade war.

The MSCI Emerging Markets index has been gradually falling since the start of the year and is now 7.86% down from where it was at the end of last year. However, despite the turmoil, there are still managers who are capable of turning out excellent returns.

This article was originally published in the October issue of the Citywire Switzerland magazine

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Over the years, wealth managers have been able to predict only one thing about emerging markets: constant change.

China’s growing clout in the tech sector is just the latest example of the rapid boom-and-bust growth pattern that characterises the market.

Some investors feel that the sector holds too much risk, while others think compelling fundamentals make emerging markets a sure bet in the long run.

Both of these streams of thought hold true, albeit at different times.

While 2017 proved to be a lucky year for emerging markets, with fund managers rediscovering their enthusiasm for the sector, 2018 so far has brought a sell-off, the collapse of the Turkish and Argentinian currencies and threats of a trade war.

The MSCI Emerging Markets index has been gradually falling since the start of the year and is now 7.86% down from where it was at the end of last year. However, despite the turmoil, there are still managers who are capable of turning out excellent returns.

This article was originally published in the October issue of the Citywire Switzerland magazine

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Thomas Schaffner 

Vontobel Asset Management

Funds managedVontobel Fund - mtx Sustainable Asian Leaders (ex Japan)

Vontobel Fund - mtx China Leaders

Vontobel Fund - mtx Sustainable Emerging Markets Leaders

Citywire rating: AA

Risk-adjusted return rank over one year: 53/259

Risk-adjusted return rank over five years: 1/155

Market share: 1.7%

Vontobel Asset Management’s Thomas Schaffner manages three funds in the sector. In the Sustainable Emerging Markets Leaders fund, which he co-manages alongside Roger Merz, he invests primarily in China, alongside smaller positions in Korea and South Africa.

The fund has seen returns soaring more than 25 percentage points above the benchmark at 56.6% over three years as of August 2018, thanks in part to the IT and consumer discretionary sectors.

Similarly, his China Leaders fund has achieved above-average returns of 64.9% over three years, ranking third out of all Citywire-rated China equity funds.

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Sam Vecht 

BlackRock

Funds managed: BlackRock Emerging Markets Equity Strategies fund

BlackRock Emerging Europe fund

BlackRock Emerging Markets Absolute Return fund

Citywire rating: AA

Risk-adjusted return rank over one year: 2/259

Risk-adjusted return rank over five years: 3/155

Market share: 0.1%

BlackRock’s Citywire AA-rated Sam Vecht manages three emerging market funds, including an emerging Europe strategy. The BlackRock Emerging Europe fund has achieved returns of 30.5% over three years as of August 2018, compared with a sector average of 18.2%.

The fund primarily plays the financial sector, which accounts for 40.3% of the portfolio, an overweight of 12.34%. It allocates 53.2% to Russia – an underweight of 2.9%. The BlackRock Emerging Markets Equity Strategy is also a standout fund, returning 7.6% over one year compared with a sector average of -2.9%.

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Related Fund Managers

Sam Vecht
Sam Vecht
1/214 in Equity - Global Emerging Markets (Performance over 3 years) Average Total Return: 55.79%
Thomas Schaffner
Thomas Schaffner
4/114 in Equity - Asia Pacific Excluding Japan (Performance over 3 years) Average Total Return: 35.04%