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Alternative Market Briefing

Thematic approach is favoured among emerging market equity strategies

Friday, April 30, 2010

Benedicte Gravrand, Opalesque London.

As emerging markets (EMs) economies continue to grow, many fund managers think one of the best investment bets could be in EM equities. Two managers explained their rationale for investing in EM equities at the Jetfin conference "BRIC 2010" in Geneva a couple of weeks ago.

Valartis: Commodities, infrastructure and domestic consumption There is a strong investment case for emerging markets, according to Valartis Group AG, a Geneva-headquartered asset and wealth manager with CHF6bn ($5.5bn) in AuM.

First of all, EMs are an attractive alternative to developed markets. Indeed the later's deficits and outstanding debt are too large and central banks' balance sheet expansion and printing is debasing currencies, making the USD's status as a reserve currency questionable, and seeing SWFs and EM central banks diversifying reserves.

The investment case is supported by growing intra EM trade and domestic growth. Low interest rates are pushing global investors up the risk curve and out of developed markets, and EMs provide good exposure to hard assets, value and growth.

"Commodities, infrastructure and consumers are our main themes," said Tim McCarthy, who manages three successful EM mutual funds at Valartis.

"EMs have to refocus their economy on domestic consumption," he continued. "That's where we find it on the upside. In fact ther......................

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