too long ago, with their superior economic growth, favorable
demographics and rapid industrialization, 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
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
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
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
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 characterized 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
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 annualized 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.