Jeffrey Bunce: In my last video, I highlighted three managers that were building cash in response to generally higher valuations in the market. The United States is particularly pricey, but not all areas of the market are as expensive. In fact, stocks in emerging markets are attractively priced by comparison. The valuation gap between the U.S. and emerging markets is so much so that prominent manager, CEO and chief investment officer at Doubleline Capital, Jeffrey Gundlach, has shorted the S&P 500 and gone long emerging markets. Now we aren’t recommending such a bold strategy, but if you were looking to trim back your exposure to developed markets and add to emerging, we have a couple of fund picks that are worth a closer look.
Our newest medalist in the category is the Bronze-rated Trimark Emerging Markets. Lead manager Jeff Feng stresses on the ground research and runs this portfolio out of Invesco’s Hong Kong office so that he can be closer to emerging Asian countries like China and South Korea that feature prominently in the portfolio. Feng’s high-quality, low-turnover approach has been successful, and the fund sports the best track record in the category since he took charge in April 2013.
Another top-pick is the Silver-rated Brandes Emerging Markets Value fund. Here you can double down on the favourable valuations within emerging markets as the Brandes team focuses on a true deep-value approach. Investors need to be patient, as investing in cheap, beaten down stocks comes with its fair share of ups and downs. Those that have stuck with it have reaped the rewards over the past 10 years, though, as the fund ranks in the top decile versus peers.
For Morningstar.ca, I’m Jeff Bunce.
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