FMG sees persistent volatility in its 'Rising 6' markets

Jonathan Boyd

Asean/China, India, Russia, Africa, the Middle East and Latin America are all areas that will suffer persistent volatility through the remainder of 2015, according to the latest outlook from manager FMG.

The emerging and frontier markets specialist is invested in the relevant markets through its Rising 6 fund, which it claims has outperformed both the MSCI EM and BRIC indices so far this year “despite emerging markets experiencing one of the most severe sell-offs we’ve seen in recent history.”

“The outperformance is due to good regional allocation decisions such as riding the China rally in the first half of 2015 and raising considerable cash in July and August when sentiment turned sour and markets sold off,” the manager said in an update on the strategy.

“Looking at the remainder of the 2015, we expect volatility to persist but acknowledge that valuations have retraced considerably. We continue to remain cautious in the short-term and look to add opportunistically over the coming weeks.”

FMG notes that Price/Earnings multiples have dropped across emerging markets since their peaks earlier this year.

The six market areas are targeted for the aggregate trends they represent for investors. FMG identifies these as including: sustainable economic growth rates that are higher than for developed markets; a combined population of some four billion, or about 60% of the global population, and of this containing a young population, with the majority under the age of 25; representing about half the world’s land mass; and offering access to a fast growing middle class that demands consumer goods.

In terms of specific countries, the fund has exposure of some 17% to India and Russia, 16% to China and 10% to Mexico. Africa and Mena represent 10% each, with Asean some 5%. Cash makes up some 15% of the portfolio.