It has been an eventful few years for emerging economies. Concerns over slowing growth in China; currency weakness in some economies; and weakening demand for commodities weighed on investor sentiment and stock market performance last year.
2016 has seen a reversal in the region’s fortunes. Stabilising commodity prices; political regime change in Brazil; and the US Federal Reserve’s decision earlier this year to delay its next interest rate rise has supported investor sentiment. Sterling weakness has also boosted the returns from emerging markets assets for UK-based investors.
Following a difficult 2015, JPMorgan has outperformed the broader emerging markets so far this year. Exposure to Brazil, a large commodity exporter undergoing political overhaul, hurt performance last year as the country’s stock market fell in value. The fund’s managers used the market weakness to add to shares in Brazilian companies, which has since proven beneficial. Lower exposure to China, a weaker-performing market this year, has also helped performance. Past performance should not be seen as a guide to future performance.
Elsewhere, the managers remain positive in their outlook for Indian companies and almost 22% of the fund is invested here. This portion of the portfolio comprises three key components:
- Financials: the managers favour private sector, rather than state-owned, banks with the potential to grow market share
- IT: the fund invests in a number of IT consultancy firms, including Tata Consultancy Services
- Consumer firms and those benefiting from infrastructure development
Fund manager update
Austin Forey, an experienced emerging markets investor, has been involved with the management of the JPM Emerging Markets Fund since its launch in 1994. He was appointed lead manager in 1997, but handed over this role to Leon Eidelman on 1 July 2016. Leon Eidelman was the fund’s previous co-manager from March 2013, although he has worked with Austin Forey since 2008. Austin Forey remains the fund’s co-manager.
Austin Forey remains a key part of the wider team and both managers will continue to work closely together. We are also encouraged they will maintain their established investment approach. Leon Eidelman tends to have a greater bias towards higher-risk medium-sized companies and exposure to these business may increase over time. That said, the majority of the fund will remain invested in larger companies and we do not expect to see any significant changes, although it has the flexibility to invest in riskier smaller companies. Overall, we maintain confidence in the managers’ ability to outperform over the long term.
Austin Forey and Leon Eidelman continue to adopt a collaborative investment approach. They seek premium-quality, cash-generative businesses where management interests are aligned with shareholders. The managers also have the ongoing support of JPMorgan’s wider team of Asian and emerging markets analysts.
The managers have delivered strong long-term performance and since launch the fund has grown 300.3%* compared with 184.2% for the sector average, although please remember past performance is not a guide to future returns. A focus on quality companies means we do not expect the fund to significantly outpace the broader market during periods of rapidly rising share prices, although we would generally expect the fund to outperform in a falling market.
|Annual percentage growth|
|Oct 2011 - Oct 2012||Oct 2012 - Oct 2013||Oct 2013 - Oct 2014||Oct 2014 - Oct 2015||Oct 2015 - Oct 2016|
|IA Global Emerging Markets||15.3||0.5||3.1||-12.8||38.8|
|JPM Emerging Markets||14.5||0.5||2.1||-12.6||42.2|
Past performance is not a guide to future returns.Source: *Lipper IM to 03/10/2016
In our view, this fund represents a superior choice for broad exposure to the higher-risk emerging markets. It maintains its place on the Wealth 150+ list of our favourite funds at the lowest ongoing charge. The Vantage charge of up to 0.45% p.a. also applies.