Sarasin & Partners has launched the Sarasin IE Emerging Markets – Systematic Fund, a Dublin-based unit trust which will be managed using the same investment strategy as the 16-year old Luxembourg SICAV, Sarasin EmergingSar – Global Fund.
Sarasin IE Emerging Markets – Systematic Fund is designed to be a low-cost way of gaining exposure to a broad spread of emerging markets, where economic growth rates continue to outperform other economies. The IMF predicts that the rate of long-term economic growth in emerging markets is likely to continue to exceed that of the developed world by two or three times.
Unlike more conventional emerging market funds which tend to have high exposure to the BRIC markets, the new fund will be equally weighted across 19 emerging market countries from the MSCI Emerging Markets index. This will give the fund greater diversification than the index, which is 64 per cent weighted in just five countries: China, South Korea, Taiwan, Brazil and South Africa. It will therefore provide more exposure to the smaller, more dynamic economies, which have traditionally outperformed the larger countries.
The fund will achieve its exposure to these markets through a process of unfunded swaps which will be executed with a number of different major investment banks. By eliminating stock picking, the fund will remove subjectivity and manager risk from the investment process and avoid liquidity issues that can arise with some stocks especially those of smaller companies.
High volatility and low correlation are characteristic of emerging markets. The fund will rebalance back to equal weightings on a monthly basis to benefit from the fact that emerging equity markets tend to “mean revert” (a result of combined high volatility and low correlation). By buying after a period of weakness and selling after a period of strength, the Fund aims to capture the “rebalancing bonus”.
The fund will have share classes tailored to users as follows:
Retail A – 1.50 per cent annual management fee, minimum investment USD1,000
Platform P – 0.65 per cent annual management fee, minimum investment USD1,000
Institutional I – 0.65 per cent annual management fee, minimum investment USD1m