Emerging Market Fund Outperforms by Overlooking Fed Decisions

In a remarkable feat, an emerging-market investment fund managed by Montreal-based Fiera Capital Corp has outshone nearly all competitors, with a strategy that places little emphasis on the decisions of the United States Federal Reserve. The fund, known as the EM Select Fund, has achieved a notable 29% return over the preceding twelve months, surpassing 4,371 of 4,383 peer funds, a success rate that places it in the top 1%.

Investing in Transformation

The investment strategy focuses on emerging economies that are undergoing significant economic changes. Dominic Bokor-Ingram, who co-manages the fund alongside Stefan Bottcher, credits the success to investments in markets less represented in mainstream benchmarks, such as Greece, Vietnam, and Saudi Arabia. These markets have seen policy overhauls driving economic growth independent of the global financial climate dominated by the Fed's decision on interest rates.

Adapting to Local Markets

According to Bokor-Ingram, even without a rate cut from the Federal Reserve, emerging markets under transformation are poised to thrive due to domestic reforms. Investors should pay close attention to less discussed markets instead of popular heavyweights like China and India, thus minimizing the impact of index-related investment flows on their portfolios.

Vietnam's pursuit of MSCI emerging market status, Greece's expansive structural reforms, and Saudi Arabia's continued investment in non-oil sectors such as semiconductors and space stand as testaments to local developments propelling market growth.

Broader Outlooks

The fund's strategy not only identifies promising markets but also entails steering clear of potentially troubled economies, such as Egypt and Nigeria, due to local conflicts, stalled reforms, and fiscal challenges. On the other hand, countries like Argentina and Turkey may see renewed interest from Fiera if they successfully implement economic reforms and policy shifts toward economic orthodoxy.

In conclusion, Fiera Capital's EM Select Fund illustrates the potential for investors to excel by adopting a strategy less reliant on U.S. monetary policy and more focused on local market dynamics and reforms in emerging economies.

emerging-markets, investment, strategy