Schroders: Investors to shift to emerging markets

Surveys at the recent Schroders Investment Conference in Lisbon show that after years on the sidelines, emerging markets are returning to centre stage for global investors.

Half the audience – which was made up of more than 150 fund selectors, intermediaries and advisers from around the world – cited emerging markets as their most relevant investment theme for the next 12 months.

Improved fundamentals are an important reason behind the lift in sentiment, but so too are the valuations.

After underperforming developed markets for five years up to the end of 2015, 71% of the audience in Lisbon now think emerging market equities are attractively priced versus their developed market peers.

This is likely to be reflected in greater flows to the region, as 64% of attendees said they expect to increase their allocation, while only 7% expect to decrease their allocation.

However, as always, investors in emerging markets are aware of the associated risks. Currently the audience’s biggest concerns are the impact of further dollar appreciation and Federal Reserve rate hikes, followed by the risk of a so-called “hard landing” for the Chinese economy.

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