Accounting for about half of current global growth and leading the world’s economic recovery, emerging markets are becoming an asset class that many investors are finding difficult to ignore. The charts below measure the contribution towards total Gross Domestic Product (GDP) and total GDP growth broken down into two sections: G7 developed nations (blue) and what we call the E7 emerging nations, including among others China, India and Brazil (red). The first pie chart shows how the G7 has dominated in terms of total contributions to GDP, although the second pie illustrates that GDP growth has been increasingly dominated by the emerging market nations. As a result, people in the West are likely to face a slower return to normality, while the emerging markets are likely to continue to grow at a pace quick enough to ensure a reasonable rate of global growth.
Source: Henderson/IMF as of 12/31/11
Emerging market equities as an asset class has historically offered greater opportunities when an active management strategy was used for stock selection. Active management offers the advantage of expert analysis backed by research and experience, which means there is a potential for net returns that outpace the market. Choosing where to invest is a daunting task – and for good reason. It is unprecedented for any one market or sector to continuously outperform, which is why it makes sense to take an active approach to investing, particularly given the high levels of volatility experienced by markets in recent years. The benefits to an investor will be a larger investment universe, greater access to new entrants into the public markets, greater risk diversification and a variety of currency exposure. Our main focus continues to be on bottom-up stock picking, and we have identified three regions where we will seek to explore opportunities in emerging markets.
While our main focus continues to be on bottom-up stock picking, Henderson has identified three areas where we will seek to explore opportunities in emerging markets:
Asia
-
Leisure / Travel – Internet, online gaming and entertainment
-
Automotive – Relatively low car ownership creating growth potential
-
Financials – Increasing use of credit cards and mortgage debt
Europe, Middle East and Africa
-
Natural resources – Strong oil reserves, industrial metals and precious metals
-
Rapid expansion / urbanization – Significant investment in infrastructure and a nascent consumer
-
Attractive demographics – A young and rapidly growing population is driving consumer spending and providing a growing workforce
Latin America
-
Population – Current population is roughly 500m, which is equivalent to that of the European Union and 60% of Latin Americans are under the age of 60
-
Political reform- Countries are moving from populist policies to a new era of fiscal reform, adopting international accounting standards and improving transparency
-
Growth potential in lesser known companies – US spin-offs and US model replicas offer opportunities
Introducing the Henderson Emerging Markets Opportunities Fund
-
A bottom-up stock picking, “best ideas” fund – active management at its best
-
Flexible and nimble, can take advantage of opportunities that larger funds may be unable to
-
Subportfolios managed by seasoned investment professionals who have specific expertise in their respective areas
-
Asset allocation by an experienced strategist who will dynamically allocate between subportfolios
-
A focused holdings list that is differentiated from the competition
-
Flexible methodology regarding capitalization and growth/value orientation
Next steps
To learn more about Henderson’s Emerging Markets Opportunities Fund, please call our sales desk at 1.866.443.6337 or contact your financial adviser.
International investing involves certain risks and increased volatility not associated with investing solely in the US. These risks included currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments. The Fund may invest in securities issued by smaller companies which typically involves greater risk than investing in larger companies. Also, the Fund may invest in limited geographic areas and/or sectors which may result in greater market volatility. In addition, the Fund may invest in derivatives. Derivatives involve special risks different from, and potentially greater than, the risks associated with investing directly in securities and may result in greater losses.
Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by calling 1.866.443.6337 or by visiting the Fund's website at www.hendersonglobalinvestors.com or by contacting your financial adviser. Please read the prospectus carefully before investing.