L&G’s Attwood on avoiding emerging market swings


Legal & General proposition manager of retail index funds Dan Attwood has warned that unpredictable swings in emerging markets make a case for broad exposure to the asset class.

While acknowledging the attractive qualities of emerging markets, Attwood says growth and equity markets can vary significantly amongst developing countries with little consistency year to year.

Since the beginning of 2013, the MSCI Emerging Markets index has lost 2.34 per cent, while the MSCI World index has gained 14 per cent. Within emerging markets, however, there is a wide variation in performance.

Attwood says: “There is little consistency seen among the top and bottom performing emerging market countries over the past nine years. A top performer one year could quite easily bet at the bottom the next.”

He notes that Turkey, the best performing emerging market in 2012 with a return of 60.74 per cent, was a bottom five performer the year before after falling 35.38 per cent in 2011.

Attwood says: “With the patchy performance of emerging markets, trying to predict which country will perform well year to year is very difficult.

”Capturing the performance across the whole emerging markets opportunity set, and mitigating the risk of over-exposure to a limited part of it, is clearly a sensible approach.”