Global Active Emerging Market vs Segmented investing

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peteyperson
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Global Active Emerging Market vs Segmented investing

Post by peteyperson »

For UK investors, indexing EM equity is not yet possible. It's 5% load and 1.76% mgmt fee or ignore the asset class entirely.

There are global emerging market actively managed funds and there are ones that focus solely on Latin America, Eastern Europe, Asia, Indian Sub-continent etc. At first I thought buying a fund or two in each sub-set of EM would be better, how can one fund manager or team be expected to know all countries & markets well enough to specialise effectively. It turns out that might not be the case, the global EM equity funds have and do exercise the option where to not invest so much as where to invest on a country to country, stock to stock basis. This may be an advantage, instead of taking an equal investment in each sub-set of EM and being stuck for 5 years with Latin America when it's doing poorly, but equally they may miss opportunities. EM more than perhaps any other equity market seems to offer a lot of opportunities for actively managed investments to outperform the index due to the volatility and lesser EMT effects, while EM index return has been mostly flat the past few years overall, a large majority of actively managed funds delivered returns several points above the index outperforming in a way few US or UK actively managed funds are able.

I'm aware most here invest by indexing in EAFE & EM via Vanguard, but if you were having to invest actively or not at all, what approach would you take and why? Note: All funds carry pretty much the same fee structure.

Thanks,
Petey
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ataloss
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Post by ataloss »

although this isn't really an answer to the question asked :wink:, I would try to find some way to buy an em etf
Have fun.

Ataloss
peteyperson
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Post by peteyperson »

There are none. It may be possible to get an American broker account but there are still some question marks over the tax treatment and I don't think I would be protected if it went down as the US protection legislation wouldn't apply to me. So I haven't ruled it out but I think it is doubtful. I don't think Vanguard or anyone else will do a British EM ETF. Too exotic. I'll be lucky if they issue on splitting out indexed value in any market <g>

Petey
ataloss wrote: although this isn't really an answer to the question asked :wink:, I would try to find some way to buy an em etf
peteyperson
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Post by peteyperson »

ataloss,

I've found this December 2002 short PDF newsletter covering the Vanguard EM index fund.

They stated:

" Over the past 1, 5 and 10 years the average emerging
fund, before fees has outperformed the index. However,
fees basis we expect this difference to reduce. "

The chart shows that the median managed fund for EM has outperformed the index even after fees. It is one of those rare occasions. Unfortunately the link doesn't copy into the post working tho it came from Google.

Petey
ataloss wrote: although this isn't really an answer to the question asked :wink:, I would try to find some way to buy an em etf
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BenSolar
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Re: Global Active Emerging Market vs Segmented investing

Post by BenSolar »

peteyperson wrote: I'm aware most here invest by indexing in EAFE & EM via Vanguard, but if you were having to invest actively or not at all, what approach would you take and why? Note: All funds carry pretty much the same fee structure


Currently all of my International exposure comes from a managed fund, because that is my only choice within my 401k. It is the American Funds EuroPacific Growth (AEPGX). (Actually the version I have access to is the R4 shares version - no load available only through 401k type plans). It has .93% in total expenses/fees. A bit high, but to me I think it's worth it for the diversification. They have pretty low turnover (29%), stable management and a good track record. If I had to pay a 5% load, I would decline and look for other options.
"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things only hoped for." - Epicurus
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