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Aberdeen Emerging Markets – The stars may be aligning

Year to date, Aberdeen Emerging Markets (AEMC) has been performing well, outstripping both its Investment Managers often use the Benchmark as a reference point for the amount that they hold in stock in their portfolio and as a risk control.  if the portfolio held the same proportions of stocks as the index, its performance would track that of the index. If the investment manager chooses to own more or less of the stock than the index he / she is taking an active position.

">benchmark and the average of competing funds by some margin (see page 9). The members of the investment management team, who predicted a resurgence in AEMC’s performance in 2019, believe there is more to come over the remainder of the year. They highlight that, globally, investors still have an overweight

See also neutral weight

Example

Stock A is 10% of an index.  A portfolio holds 8% of Stock A.  The portfolio is underweight Stock A by 2%

Germany is 10% of the European Index. Investment manager is concerned about Germany. Portfolio holds 8% and is 2% underweight

Outcome

If stock A's share price rises, the portfolio performs badly relative to the index because it holds 2% less than the index

If German markets fall, the portfolio performs well relative to the index because it holds 2% less than the index

">underweight exposure to emerging markets. In addition, the recent interest rate cut in the US could signal a halt to US dollar strength, to the benefit of emerging market currencies and stock markets.

That said, as the US/China trade war rumbles on and accusations of currency manipulation are bandied about, Chinese growth is slowing. The best-performing markets of recent times have been in South America and EMEA (Europe, Middle East and Africa). Now is when a manager of a global emerging markets fund that can add value through its asset class allocation - choosing what types of investment you want to make.

">asset allocation decisions earns its keep.