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Articles and opinion

A fresh approach for investment opportunities in emerging markets

Family offices around the globe are increasingly aware of the growth that is coming from the developing economies of the world. Against a bleak backdrop of anaemic growth in the West, combined with fiscal deficits that will endure a lifetime, increasing one’s exposure to the growth markets of world, from where over 50% of global GDP is derived, seems a pretty sensible course of action.

Up to now however, most investor forays into emerging markets have largely been captured by the indiscriminate flows of ETFs, which flow in and out of these markets, increasing volatility on these often illiquid local exchanges. Otherwise, it’s the huge, unwieldy and invariably benchmarked offerings of the Global Emerging Markets (“GEMS”) manager, housed in their ivory towers in Boston, Chicago and London, that capture the flows. This approach to the emerging markets was born of the pre-crisis era when institutions made only token allocations to the developing world, representing only 2 to 3 per cent of total assets under management.

With institutional investors now seeking to increase their allocations to somewhere in the 8% to 13%* range over the next eight years, even the most conservative end of these assumptions would suggest that some 5 trillion US dollars will flow into the emerging stock markets.

Following their first Emerging Markets Investment Symposium, on December 5th at London's Lansdowne Club, Simon Hopkins of Milltrust asserts that much of these flows will move to the better regional asset managers rather than the bulge bracket global firms, as investors look for greater local knowledge, a real cultural affinity from their portfolio managers handling their allocations.

An alternative approach, as developed by Milltrust is to bring together specialists from across the globe who for years have been at the forefront of seeking out the better boutique and specialist managers. With a presence already established on five continents, Milltrust currently works with six regional investments groups, in Latin America, Greater China, South East Asia, India and Africa to provide the building blocks of GEMS strategy.  This is accomplished through a single, transparent custody platform provided by the firm through their partnership with State Street, the world’s largest independent custody bank.

This fresh approach means that investors can pick and choose from the managers to build the exposures to the markets that meet their view of the world. What is more, the managed account platform ensures that investors’ interests are protected, that capital need never be wired out to offshore funds controlled by managers on the other side of the globe, and where total transparency affords the investors the knowledge to understand where returns and coming from, and what risk are being taken to deliver those returns.

Milltrust International is a unique emerging markets focused investment group that showcases some of the world’s leading regional investment managers through its Irish regulated UCITS platform.  www.milltrust.com