A long-short emerging market stock-picking equity fund that is marking its first year in the business is positioned for improved economic data in the coming months, its managers said in a recent note.

“We are currently of the belief that macro data will improve over the coming months as the lagged effect of rate cuts are transmitted to the real economy, commodity price declines put extra dollars in consumer pockets, and the removal of immediate European uncertainty has a positive effect on company hiring plans and consumer spending globally,” according to the latest factsheet of the Montlake Skyline UCITS Fund.

The portfolio, which now oversees over $50 million in assets, was set up at the end of August last year. The Ireland-domiciled fund has a net exposure, as a percentage of net asset value, of 66 per cent; long positions make up 104 per cent of exposure, with shorts at 38 per cent. The fund invests in business based in or substantially exposed to emerging market growth; its single biggest long holding is in Adidas, the German sportswear firm, at 6.9 per cent. Another substantial holding is Estacio, the Brazilian education firm and the fund's largest emerging market position.

In the fund’s latest investment note, managers Geoff Bamber and Vernon West point out that July is, according to historical data, the strongest performing month for equity market returns. As if to bear this observation out, the fund delivered monthly returns (dollar institutional share class) of 4.0 per cent, taking the year-to-date return to 13.6 per cent, comfortably beating the MSCI EM Index return of 3.9 per cent since January.

If as is hoped economic data and markets improve, this will be particularly positive for emerging markets, Bamber and West argue.

“The best scenario of all is that the global economy picks up of its own accord, purging central banks of the need to adopt unconventional tools. This would lead to a sizable rally in risk assets, particularly emerging market equities given their dramatic recent under-performance,” they said.

The fund, which is available to investors in euros, sterling, Swiss francs and dollars, carries a 1.5 per cent annual management fee and 17.5 per cent performance charge for institutional investors; for retail clients, the annual charge is 1.5 per cent and performance haircut is 20 per cent.