Darius McDermotton, the managing director of Chelsea Financial Services and chairman of the Association of Independent Discount Brokers, has written an article for British website everyinvestor.co.uk saying it has become increasingly difficult to buy a good global emerging market fund.
For starters and with less broker coverage, funds need boots on the ground to do their own research and not every fund provider has the resources. Hence, emerging market funds are often slightly more expensive than other funds.
In addition, many of the best emerging market funds are now closed to new investors. In fact, four of the five top-performing emerging market funds for British investors over the past five years are now hard or soft closed.
He then criticized many of the top emerging market funds for all holding Samsung and Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) along with Hyundai to a lesser extent, saying:
Do all these top managers really all have these two stocks as their best ideas? Samsung based in Korea, is not even in a country which many would consider to be an emerging market, although the company has interests around the globe. I have always believed in a contrarian philosophy when it comes to investing. Historically, the best managers have made money by being different from the crowd. There isn’t much choice for investors when every fund holds the same stock.
And:
If I pay for an active manager I want them to do something different. It is perhaps unsurprising that only six funds beat the MSCI Emerging Markets over 10 years. Of these, four were closed in some form until recently and one beat the index by just 1%.
To read the whole article, Choosing an Emerging Markets fund, go to the website of everyinvestor.co.uk
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