Jerome Booth, head of research at $33 billion-in-assets Ashmore Investment Management in London, was having lunch in Munich last month with a large German institutional investor who was crowing about changes he had made to his portfolio. After years of hearing Booth preach about the need to dramatically increase exposure to emerging-markets economies, the investor excitedly announced that he had shifted his conservative stance and doubled his allocation — to 10 percent. Unimpressed, Booth deadpanned, “So you’re still comfortable with 90 percent in the crash zone?”
Many institutional investors are fundamentally rethinking their approach to emerging markets. Attracted by the powerful growth of economies in countries such as China, India and Brazil, investors have been putting more of their money in these markets. The debacle in Greece, concerns about the future of the euro and worries about debt levels in developed countries are providing more reasons for investors to shift their weightings. Fund managers increasingly regard emerging markets as a core part of their portfolios rather than a high-risk sector that they can flit into and out of tactically in an effort to boost yield, says Allan Conway, head of emerging-markets equities at Schroder Investment Management. The London-based fund manager has $24 billion of its $255 billion in assets in emerging markets.
As part of this shift, many investors are setting their own allocation targets for emerging markets and using specialist managers with extensive footprints in these regions to build up positions, instead of leaving the ....