The new Emerging Markets Fund offered by FERIQUE Fund Management is designed to give investors access to a vast market of securities that can potentially increase the performance and diversity of their portfolios if they are willing to assume additional risk.
Most economic and financial experts are forecasting more modest growth in the years to come, particularly in the developed markets. The FERIQUE Emerging Markets Fund is intended to partially offset this scenario.
Currently, the world’s economic growth is occurring above all in emerging markets. China’s economy alone will account for more than a third of global growth in 2016, namely 1.2% of the world’s 3.1% performance, according to Stephen Roach, chief economist at Morgan Stanley. If we add India’s economy, we go from 1.2% to 1.8% of the world’s economic performance (from the 3.1%).
Growth in emerging markets is driven by promising two-fold dynamics: some of these countries have the extremely positive attribute of a young population, especially India; and a number of them are shifting from manufacturing and exporting to consumption. China’s middle class is already larger than that of the United States, and this will soon be the case in India as well. This situation will bring about significant economic growth.
In addition to their economies, emerging markets also have stock markets that offer greater growth potential. JP Morgan Asset Management forecasts that U.S. large caps could generate an annual return of 5.75% (CAD) over the next decade. In contrast, the annual return on emerging market stocks should be 8.75% during the same period.
Even though the potential returns are attractive, investors should be aware that this type of investment involves greater risk. JP Morgan Asset Management also forecasts that the volatility of U.S. large caps during the same period could be about 12% versus 18.75% for emerging markets equities. The FÉRIQUE Emerging Markets Fund therefore should not constitute the foundation of a portfolio, but instead should serve as a component that seeks stronger growth over the long term, but with increased risk.
It is essential to keep in mind that emerging markets involve substantial risks (political risks, currencies, debt levels, etc.). The recent outcome of the U.S. election has only added to the uncertainty; Donald Trump’s statements could presage a stronger U.S. dollar and a degree of protectionism, two factors that are negative for emerging markets.
Using a formula that has already proved successful for FERIQUE Fund Management, the new Emerging Markets Fund has adopted a multimanager approach. The fund invests in two underlying funds: the NEI Northwest Emerging Markets Fund, a responsible investment leader; and the TD Emerging Markets Fund. Its 1.5% management fee is one of the lowest in its category.[i]
“Investing in two underlying funds enables us to offer a diversified investment product with a very competitive management expense ratio,” said Louis Lizotte, CFA, Vice President, Investments, of Gestion FÉRIQUE. “And we have stayed faithful to our multistrategy management approach, while optimizing our costs, which is a distinct advantage for our investors.”
This is the second fund that FERIQUE Fund Management has launched this year. The FERIQUE Diversified Income Fund was launched last spring. The two new funds have enabled us to optimize the geographic allocation of our balanced funds in addition to improving the diversification of our asset classes.
If you would like more information or if you would like to invest in these funds, we suggest you contact Advisory Services at FÉRIQUE Investment Services. A Mutual Fund Representative will propose an optimal investment strategy based on your objectives and investor profile.