Emerging markets have become the preferred equity market for the majority of IFAs, a survey by JP Morgan Asset Management found.
At the same time, however, the typical UK investor portfolio is underweight in the region. The research suggests that 61 per cent of those polled favour emerging markets, followed by the US with 23 per cent, Japan with 13 per cent and Europe with only 10 per cent.
Interestingly, in a similar poll by JP Morgan Asset Management last year, only 25 per cent favoured emerging markets, while 51 per cent went for the US.
The popularity of emerging market stocks is not surprising, given the strong gains in these markets in recent years - notwithstanding the sharp correction in 2008. The Morgan Stanley Capital International BRIC Index has, since the start of January, delivered total returns, with reinvested dividends, of 85 per cent. The MSCI World Index of developed countries' shares has made returns of 27.2 per cent.
The JP Morgan survey was conducted at the firm’s Investment Summit 2009 among over 150 of the UK investment advisors.
The survey also revealed that 40 per cent of those polled favour the emerging Asia region within emerging markets, while 20 per cent favoured Brazil and seven per cent opted for Eastern Europe. At the same time, average UK private investors typically only hold only 0.1 per cent of their portfolio in the region.
“It’s encouraging to see IFA sentiment swing back in favour of emerging markets as the case to invest in the region is a compelling one,” said Jasper Berens, head of UK sales at JP Morgan Asset Management.
“However, despite this, UK investors are structurally underweight in the biggest investment story of the century. This should be addressed and I would like to see the weighting apportioned to emerging markets in a typical UK investor portfolio better reflect the level of investor sentiment toward the region,” he added.
Richard Titheringon, chief investment officer for emerging markets at JP Morgan Asset Management, said: “One of the key things fuelling the growth of emerging markets is population change. Demographics is one of the growth factors that is at the heart of the boom on consumption, infrastructure, financial services and commodities which are all driving factors in the emerging markets story.”
"UK investors should be structurally overweight in emerging markets because they should outperform developed market equities, and rise in weightings in global equity indices over the next 5-10 years," he added.”