Baring Asset Management said it is has identified a more risk-favourable environment in emerging markets and changed the asset allocation of its Dynamic Emerging Markets fund to reflect this.
Barings co-manager of the Dynamic Emerging Markets funds, Hartwig Kos, said that last summer and autumn was a highly volatile period, due to the European debt crisis and fears of a hard landing in China. “In this respect, we viewed emerging market assets as highly correlated and we needed to take risk out of the portfolio,” he said, adding the fund has invested in Australian government bonds, Chinese renminbi and gold in order to diversify and reduce risk at that time.
However, Kos said that Barings has now identified a more favourable climate for riskier assets and has reduced its Australian bond allocation and moved to a higher allocation to emerging market equities. “The catalyst for this change was strong economic data from the US and signs that Europe is pulling out of its sovereign debt malaise (supported by positive action from the European Central Bank). We have been seeing a recovery, of sorts,” Kos said.
Barings launched its dynamic emerging markets fund in June 2011, with the aim of taking a dynamic and tactical multi-asset approach to emerging markets. It has returned 0.59% since launch compared to a return of -3.91% for the MSCI Emerging Markets index. At the end of February 2012 the fund had 52% in equities, 42% in bonds and 6% in gold.