The fund manager said that while sentiment towards emerging markets is positive over the long term, investors who are cautious might miss the strong growth projection for the asset class over the long term.
“If you want to give yourself a 5 or 10 year time frame than yes… people’s understanding of the emerging markets proposition has advanced quite significantly,” Capital Group vice president and investment specialist Andy Budden said.
“But if you change the time frame to the last say two or three months I think that sentiment has actually gotten weaker.”
Capital Group said that emerging markets are projected to outgrow developed economies over the long term by 10 per cent or more, providing an opportunity for investors.
The group released an all-asset class Emerging Markets Total Opportunities (ETOP) fund in September last year, to provide investors looking for emerging market returns without the high volatility of the asset class.
ETOP works through a selection of individual securities based on their risk/return profile within emerging markets, which are then allocated in the fund.
“Our objective is emerging market equity like returns for clients over the long term but with much much lower volatility,” Mr Budden said.
“Volatility isn’t just exciting; volatility actually kills long term wealth generation.”
For investors in the draw-down phase before retirement, Capital Group said that the fund would provide an entry point into emerging markets with much less risk.
“We know about the aging of the population here but there is still a need for growth assets in investment portfolios,” Capital Group senior vice president and head of Australia Paul Hennessy said.
“We talk about the investment dilemma of folks looking for growth assets and in particular the emerging markets … provides tremendous growth opportunities.”
