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EXCLUSIVE INTERVIEW: Now Is The Time To Invest In Emerging Markets - SKAGEN

Stephen Little, Reporter , London, 4 October 2013


A European funds firm says that now is the time to get back into emerging markets after this sector has had a tough recent period, according to an interview by this publication.

Not too long ago, with their superior economic growth, favourable demographics and rapid industrialisation, emerging markets were seen as a no-brainer for investors looking to improve their portfolios.

However, in the past year, some analysts have argued the story appears to be changing. Earlier last month, the International Monetary Fund said that it sees the dynamics of global growth shifting away from emerging markets and noted that “momentum is projected to come mainly from advanced economies, where output is expected to accelerate”.

Growth in the Chinese and Indian economies has slowed and Thailand has fallen back into recession. Between March and September this year, the MSCI Emerging Market Index fell 12.6 per cent from 1,053.89 to 920.84, although it has since recovered some ground to end September on 996.34.

While the US Federal Reserve's decision last month to maintain its monetary stimulus has sparked a rally in emerging markets, many experts believe this growth will only last until the inevitable tapering begins next year.

Despite the freefall in emerging markets this year, Norway's SKAGEN Funds believes there are significant opportunities for long-term investors to benefit from exceptionally low valuations in emerging market stocks, resulting from recent changes in the macroeconomic climate, Tim Gordon, UK client relations at SKAGEN, told this publication in a recent interview.

"As a result of negative sentiment, valuations on some fantastic businesses are being pushed down. The fundamentals of the businesses are still very compelling; it's just that sentiment has shifted. On a medium to long-term view, we think it's a great time to invest in global emerging markets," said Gordon.

SKAGEN established itself in the UK institutional and wealth management markets four years ago. With a team of nine based at its London office, the firm currently has £1.2 billion ($1.92 billion) of UK assets under management. Earlier this year, it extended its offering to the wholesale and retail audience, marketing its funds through the Transact and Raymond James platforms.

SKAGEN invests in companies that are typically at a low price and are characterised by being undervalued, under-researched and unpopular.

The firm's two largest funds have consistently performed above the benchmark over the past 10 years.

With £5.5 billion in assets under management, the Kon-Tiki fund aims to invest at least 50 per cent of its assets in emerging markets and the remainder in developed market equities with emerging markets exposure.

In the past ten years the Kon-Tiki fund has generated a 20.4 per cent return on an annualised basis, outperforming the MSCI EM Index's 12.4 per cent by quite a margin.

The £5.2 billion Global fund, invested in global equities, has made 17.1 per cent since its inception in 1997 and 11.4 per cent over the last three years. Over the last 10 years it has outperformed the MSCI AC Index by 7.8 per cent.

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