Emerging markets will continue to provide reasonable returns if investors adopt measured long-term strategies and prepare for periods of substantial volatility, says Lonsec.
In its annual Global Emerging Markets and Regional Equities Sector Review, Lonsec said for the first time since 2010, emerging markets outperformed Australian equities for the year to June 2015.
Lonsec found that for the year end June 2015 in Australian dollars, the emerging markets benchmark delivered close to 16 per cent.
Lonsec report author and senior investment analyst Steven Sweeney said: “Country factors, which include politics, economic metrics and money flows, continue to have a bearing on performance in emerging markets.”
“Retail investors and their financial advisers should consider a measured allocation to emerging markets with exposure to higher-performing economies, such as Asia, from a long-term perspective.”
The report found that Indian equities performed strongly, delivering 35 per cent in 2014 and 27 per cent for the year to June 2015. Asian equities delivered 15 per cent in 2014 and 27 per cent for the year to June 2015, according to the report.
“For this year, fund managers who positioned portfolios more towards Asia and avoided Russia and Brazil tended to achieve improved performance outcomes,” Mr Sweeney said.
Mr Sweeney reminded investors to be aware of ongoing market risk as the sector remains more volatile than global equities.
“In many ways, the recent swings between buying and sell-offs are really just business as usual for emerging markets investors,” he said.