Emerging markets still offer returns

Investors uneasy over subdued equity returns in emerging markets need not exit the sector just yet, global asset manager AllianceBernstein said.

The asset manager said that while focusing on beta trade and following emerging market indices worked in the past, the scenario is different now and investors should change their strategy accordingly.

"For the 10 years ended December 31, 2013, emerging-market equities and bonds delivered respective annual gains of 11.2 per cent and 11.8 per cent, far outperforming developed-market equity returns of 7 per cent," portfolio manager and director of research Sammy Suzuki said.

"Those growth tailwinds are now diminishing as the credit, commodity and investment cycles have peaked and many developing-world countries feel the impact of China's difficult economic transition."

VIEW ALL

View all

Suzuki said investors should structure their exposures actively and look at getting alpha or above-market returns.

This would mean using bottom-up stock picking instead of GDP growth outlook to decide on a portfolio's exposure to an emerging country as GDP growth as proved unpredictable.

The firm also suggested investors should invest in stable-growth companies, and should not be scared to cut their losses, or exit winners too soon.