There is increasing demand from Australian investors for emerging market investment exposure with lower volatility, according to Capital International.
“It is very clear in Australia and has been for some time that, for example, by 2025 about 50 per cent of the world’s GDP (gross domestic product) and the real growth over that period of time is forecast to come out of the emerging market regions,” Capital International head of Australia Paul Hennessy told InvestorDaily.
“With the draw-down that people suffered, the volatility or price movement is something people really struggle with.”
In response to investor demand for a less volatile and more flexible investment strategy for emerging market opportunities, the fund manager has launched an Australian fund version of its emerging markets total opportunities (ETOP) strategy.
“What we’re aiming to provide is a much smoother ride through that investment period,” Hennessy said.
He said the new strategy would be the company’s main focus for the medium term, but there were plans to launch a fixed-income solution early next year to complement the fund.
The fund, which aims to capture emerging market growth opportunities while dampening volatility, has the flexibility to invest in a broad range of traded securities from over 60 developing countries.
Capital International ETOP portfolio manager Shaw Wagener said the company sought long-term growth and capital preservation but with “lower volatility of returns than emerging markets equities”.
“We came up with the idea for ETOP after talking with investors who told us that they wanted exposure to emerging markets, but without having to endure high volatility. We concluded that to do this, we needed to create an investment strategy with great flexibility, as well as a process to manage that flexibility,” Wagener said.
