FUND FOCUS:Emerging markets

Best Performer YTD:

AXA First State Global Emerging:+ 13.35 per cent

Worst performer YTD:

VAM Emerging Markets Growth:-3.55 per cent

WHILE DEVELOPED markets have had an extremely turbulent few years, the experience of the riskier emerging markets has been less volatile.

According to Moneymate, in the year to June 16th, Irish gross domestic emerging market funds returned 6.22 per cent on average, or 32 per cent over the past 12 months.

Best so far this year is the AXA First State Global Emerging fund, which has returned over 13 per cent. Another strong performer

is Irish Life’s Indexed Emerging Market Fund, which is benchmarked against the MSCI Emerging Markets Index, and which is up by 12.45 per cent in the year to June 16th.

Worst performer of the bunch is the VAM Emerging Markets Growth fund, which has lost almost 4 per cent so far this year, although its 12-month average is still north of 20 per cent.

Heavily weighted towards Asia and the Americas, the fund has been hit by the poor performance of its top holding, Samsung Electronics, which was fined by the European Union on charges of illegally fixing prices.

According to Colm O’Brien, head of indexation with Irish Life Investment Managers, since mid-2008/09 more money started flowing into emerging market funds, pushing up prices.

“Now emerging markets are becoming a very popular product, which is pushing up performance,” he notes, adding that these investment flows are a reasonably big driver of current performance.

According to O’Brien, South American countries, such as Mexico, Chile and Peru, are performing very strongly at the moment.

He believes that emerging markets will be influenced by growth in Brazil, Russia, India and China, and investment flows into the various markets.

While exposure to emerging markets can help investors achieve diversification, O’Brien urges investors to remember that this is limited by the fact that “ultimately you’re still invested in equities”.

The main risks come from the potential of a slowdown in global economies, he says.