Investors Seek Higher Returns in Emerging Markets Funds
Most investors have preferences when it comes to allocating to alternative products. Some take a fundamental approach, others prefer quantitative tools. But all look to buy low and sell high. An area that is providing this opportunity is emerging markets.
Although emerging markets can be volatile, they are priced at deep discounts. As a result, many investors feel emerging markets have a better chance of providing higher returns than developed markets. Last week, EPFR Global reported the second-largest net inflows to emerging market equity funds.1
The marketplace has been quite turbulent over the past month; however, many alternative investors have conveyed their interests in emerging market funds to BHA analysts. A family office in New York City, for example, stated that it is seeking region- and country-specific emerging market hedge funds focused on Asia or Latin America. The firm is also evaluating global macro, event-driven, or multi-strategy funds for these allocations.
Family offices aren’t the only investors looking to allocate to the emerging market space. During the past few weeks, BHA analysts have seen a mix of family offices, corporate pensions, wealth advisors, and many other investors looking to add capital to emerging market hedge funds. This could be a positive sign for fund managers in this space, as investor sentiment has been fairly pessimistic due to the volatility in these markets.
1 The Economic Times, “Emerging market funds get second-largest inflows in ’10,” June 19, 2010.