Investors who are concerned about the short-to–medium–term outlook for emerging markets but reluctant to disengage from the asset class entirely can explore ways to diversify their exposure, according to global asset manager AllianceBernstein (AB).
The remarks were prompted by the award of an AUD100 mandate from superannuation fund VicSuper for AB’s Emerging Consumer strategy.
“This approach offers diversification from traditional emerging-market equity strategies in two ways—by focusing on emerging-market consumers and by being benchmark-unaware,” says Tassos Stassopoulos, Portfolio Manager—Emerging Consumer, at AB.
Consumption growth in emerging markets represents one of the biggest investment opportunities in the world, with McKinsey Consulting estimating that emerging-market consumers will be spending USD30 trillion a year by 2025.
Instead of focusing on stocks listed in the emerging-market equities benchmarks, or on developed-country stocks with emerging-market exposures, the Emerging Consumer strategy uses what Stassopoulos calls “grassroots” research to explore themes identified by top-down analysis.
“Our grassroots research involves visiting emerging-market countries and talking to business owners on their premises and consumers in their homes,” says Stassopoulos. “We research the opportunity as we would if we were a company entering the market. We talk to consumers about their spending habits, hopes, dreams and aspirations, and then work out which companies are going to benefit.
“By doing this, we aim to avoid the trap of being captive to stocks listed in the indices, which we believe are really yesterday’s success stories, not tomorrow’s. It also helps us to expose, and work to avoid, many myths that have grown up around the emerging-consumer opportunity.”
Stassopoulos noted that he and his team had visited 13 countries since 2011, spending more than 100 days to conduct grassroots research. The countries included Mexico, Peru, Chile, West and South Africa, India, Indonesia, Thailand, the Philippines and China.
“The Emerging Consumer strategy will diversify our emerging-market equities exposure,” says Oscar Fabian, Chief Investment Officer of VicSuper. “We were impressed by the product’s uniqueness.”
AB also manages an Emerging Markets Value mandate and Australian Value mandate for VicSuper.