Rathbone’s David Coombs says his early optimism in emerging markets is starting to pay off and that he plans to stay bullish on the region for the foreseeable future.
Coombs started to increase the allocation to emerging markets across his three multi-asset portfolios from October last year – with the most notable move taking place in the Rathbone Multi Asset Enhanced Growth fund.
At the end of September, about 33% of the portfolio was allocated in Asian and emerging markets. This was gradually increased to about a “quite punchy” 42% against the benchmark’s 35%.
Coombs increased holdings such as the Baring Emerging Europe trust, the Scottish Oriental Smaller Companies investment trust, the Coupland Cardiff Asia Alpha Plus fund, the Edinburgh Dragon trust, the First State Global Emerging Markets fund and a Brazilian exchange-traded product.
Reasons for the manager’s optimism include the likely peaking of monetary tightening in emerging markets, falling inflation and the positive impact of the recovering US economy on the global stage. However, the move did not pay off immediately. (article continues below)
“It worked against us in November and December when US and UK markets were the best performers while Asia and emerging continued to be pretty poor,” Coombs concedes.
“But in January and February that turned around. Enhanced Growth is about 10% up year to date as that bet’s finally starting to pay off.”
Coombs also increased Asian and emerging market exposure in his Rathbone Multi Asset Strategic Growth and Rathbone Multi Asset Total Return funds, although to smaller degrees appropriate to their risk profiles.
The manager’s optimism in emerging markets is a long-term stance, which he can see standing for up to two years. Although exposure would be cut if the market became “extremely overbought”, Coombs expects emerging economies to be one of the major beneficiaries of the global recovery.
“There are a lot of ducks lining up behind emerging markets for us,” he says.