Every fund manager will face a period where their fund will underperform the index, it's part of the job.
It's the ones who manage to turn their performance around in the space of just 12 months that you want to be looking out for as the chances are they will continue delivering.
The emerging market equity sector continues to attract investors, as seen during a recent poll at our Citywire Miami 2018 event, but it can be hard to know which fund managers have the skills to fight back after losing to what can be a tough and uncompromising market.
The analysis period of this ranking covers two distinct and successive 12-month periods, February 2016 to February 2017 and February 2017 to the same month in 2018.
We compared manager rankings over these two periods in the 500-strong sector to find out which ones managed to turnaround their performance and beat the market in just 12 months.
All the managers featured had produced returns of 23% or above between 2016-2017 but had still all underperformed the MSCI Emerging Market index.
Find out below how they fared the following year and how far they rose up the ranking ladder.
4. Isabelle Irish/Michael Levy/William Palmer – Baring Asset Management
- Fund: Baring Global Emerging Markets
- Feb. 2016-Feb. 2017: 246/496
- Feb. 2017-Feb. 2018: 2/513
- Ranking jump: +244 places
Kicking off our most improved ranking is a London-based trio of fund managers from Barings which is owned by US group MassMutual. Both Irish and Palmer hold a Citywire AA rating and Levy an A rating.
After underperforming the MSCI Emerging Market (EM) index’s 29.9% between February 2016 and February 2017 with a return of 26.2%, the trio managed to beat it over the following 12-month period by a solid ten percentage points with a return of 41%.
Stock names that will feature throughout this ranking like Alibaba Group, Tencent and Samsung Electronics are in their top holdings as of the end of January 2018 factsheet. In their commentary covering that month the trio said:
‘China Construction Bank ended the period as the fund's top performer helped by an improving outlook due to expanding net interest margins and rising consumer loan demand.
‘Property developer China Resources Land was another notable contributor to relative performance with the company posting stronger-than-expected sales. Chinese ecommerce business Alibaba also performed strongly as it continues to develop new revenue streams.'
3. Gary Greenberg – Hermes Investment Management
- Fund: Hermes Global Emerging Markets
- Feb. 2016-Feb. 2017: 263/496
- Feb. 2017-Feb. 2018: 10/513
- Ranking jump: +253 places
Another UK-based manager producing a strong two-year turnaround performance is Hermes’s Citywire AA-rated manager Gary Greenberg.
After underperforming the MSCI EM’s 29.9% between the 2016-2017 analysis period with a return of 25.3%, Greenberg’s fund experienced an impressive rise in returns. It beat the index by almost 12 percentage points with a return of 41.9% over the following period.
His $4.1 billion has China and India as its top country allocations at 32.9% and 13.4% respectively, following by Taiwan and Korea.
Well-known emerging mega stocks like Tencent, Samsung Electronics and Alibaba featured as his top three stock holdings.
2. Nigel Dutson/Tarlock Randhawa/Chris Carter/John Birkhold – Principal Global Investors
- Fund: Principal GI Origin Global Emerging Markets
- Feb. 2016-Feb. 2017: 246/496
- Feb. 2017-Feb. 2018: 6/513
- Ranking jump: +271 places
In second place in our ranking is a Citywire A-rated quartet from UK boutique Origin Asset Management, part of the Principal Global Investors group.
Over the 2016-2017 analysis period, the Origin team were mid-table in the near 500-strong EM equity manager ranking, having underperformed the MSCI EM’s 29.9% by over four percentage points.
The following 2017-2018 saw them return turnaround their fortunes as they beat the index’s rise of 31% by an impressive 12.25 percentage points to return 43.25%.
As of the end of January 2018, the fund’s largest sector allocation was toward technology and financial services at 31% and 25% respectively. Chinese tech and consumer giant Tencent Holdings and Alibaba Group are among its top stocks holdings as well as Taiwan Semiconductor Manufacturing Company.
1. Murali Srikantaiah – Wellington Management
- Fund: Wellington Emerging Markets Local Equity
- February 2016-Feb. 2017: 413/496
- Feb. 2017-Feb. 2018: 1/513
- Ranking jump: +412 places
Topping our list of most improved fund managers in the emerging market equity sector is Wellington’s Citywire A-rated Murali Srikantaiah. He has been managing this fund since 2013 and currently has around $870 million in assets under management.
Between February 2016 and February 2017, his fund underperformed the MSCI Emerging Markets index’s 29.4% by over six percentage points. However, over the following 12 month period he outperformed with a return of 55.4%% compared to the MSCI EM’s 31%, making him the best returning manager in his sector over one year.
According to an end of December 2017 factsheet, Srikantaiah’s fund had just under half its assets in financial services and consumer cyclical stocks. His largest holdings were, as has been the case throughout this ranking, Tencent Holdings and Alibaba Group.