“It has been a difficult period for Emerging Market equities over the last few years, with GDP growth in these countries slowing compared to developed markets”, says David Orr, Senior Portfolio manager at Sparinvest, in an interview about the fund Sparinvest Ethical Emerging Market Value.
He explains that because of this difficult period there have been outflow from EM-markets and some weakness relative to the developed markets. Going forward, looking at IMF forecasts and a growing number of expectations, David thinks there is reason to believe that EM growth could accelerate relative to developed market growth over the coming years, and that could support emerging market equities.
Coming from a value house like Sparinvest, David underlines the importance of having value shares in the portfolio as part of diversification. Value stocks have had some headwinds in the last few years, and have become cheaper relative to growth stocks.
David explains that the shares in Sparinvest Ethical Emerging Market Value have been researched from a bottom-up perspective, identifying stocks where there is a significant discount compared to what we think they are really worth. The portfolio has also been ethically screened, and has small and mid-cap exposure. The fund’s reasonable performance relative to its benchmark appears to be benefitting from individual stock selection.
See the full interview here