New way to invest in emerging markets

US based fund manager, Parametric, has launched an emerging market (EM) equity fund for Australian superannuation funds that claims to give investors access to a ‘third way' to invest.

According to Parametric, the ‘third way' involved using a disciplined, rules based, engineering approach to investing in emerging markets.

The fund manager's chief executive, Chris Briant, said the strategy was designed as a ‘third way' to invest into EM, given the known shortcomings of both index-tracking and active EM strategies.

Their approach was developed to efficiently and consistently capture long-term growth of EM, while it avoided the inherent return risks of active management and concentration risks of mainstream indexes, Briant said.

Parametric's investment approach was deliberately distinct from both passive and active, he said.

"Unlike many active strategies, this strategy seeks to provide the strategic benefits super funds desire, by maintaining a consistent, broad exposure to a wide range of EM countries, while managing the high cost environments inherent in these markets," Briant said.

The fund focused on diversification and rebalancing, while it also avoided the need for ‘active country', ‘security insights' or return forecasts.

Their emerging markets equity fund had over US$15.7 billion ($20.97 billion) in assets under management and included a recently awarded mandate from an Australian industry super fund.

Over the past year the fund manager had doubled their funds under management in Australia.

"[That] tells us our implementation capabilities are very relevant to the problems funds are trying to solve today," Briant said.