The Allianz BRIC Stars Fund will broaden its focus beyond Brazil, Russia, India and China. Kunal Ghosh, the fund's manager, now has the flexibility to invest across the broader spectrum of higher-risk emerging markets as he sees fit.
The manager previously utilised the flexibility to invest up to one-third of the fund outside the BRIC countries by investing in some Taiwanese and South Korean businesses, for example. The change in the fund's investment universe means geographical diversification will gradually increase further.
Diversification by sector will also increase. The BRIC countries are weighted heavily towards certain industries such as energy, for example, meaning this sector currently accounts for 24% of the fund. Yet energy businesses only account for around 7% of the broader emerging markets. Investments in this area of the market are likely to decrease over time. Overall, increased diversification could help reduce the volatility of the portfolio.
The fund's benchmark has also changed to the broader MSCI Emerging Markets Index. Its previous benchmark was equally weighted between each of the four BRIC countries. The fund has also been renamed as the Allianz Emerging Markets Equity Fund.
Please note the fund can invest in smaller companies, which are higher risk than their larger counterparts.
While the BRIC countries maintain a significant presence in the developing world, the relationship these four countries share with the rest of the world has evolved over time.
The manager's investment universe will broaden as a result of the recent change and we view the increased flexibility afforded to him positively. We prefer managers to adopt an unconstrained approach in order to achieve their objectives and believe it presents greater opportunity to deliver better long-term returns.
Kunal Ghosh and his team have outperformed the benchmark since assuming responsibility for the fund, although past performance is not a guide to the future. However, their longer-term track record, including managing other emerging markets portfolios, is not as strong. We would prefer to monitor their performance following the recent changes over a prolonged period. As such, this fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.