According to research conducted by New Star*, 70% of investors believe emerging markets such as China and India and the countries of Africa and Latin America will generate superior investment returns in comparison to developed markets such US and Japan and the countries of Europe over the medium to long term*.
The survey revealed that 90% of investors had exposure to the UK, 40% had exposure to the rest of Europe, 22% had exposure to the US and 14% had exposure to Japan. In spite of investors' strong belief that emerging markets will outperform developed markets over the medium to long term, just 10% had exposure to China, 7% had exposure to India, 4% had exposure to Latin America and only 2% had exposure to Africa. Of those surveyed, more than half - 51% - were considering increasing or adding exposure to emerging markets such as India and China and the countries of Latin America and Africa.
Richard Wilson, marketing director, New Star, says:
"This research shows that the potential of emerging markets is well recognised yet investors remain underweight in these regions. Investors have been willing to sacrifice superior returns in the past for more familiar markets such as the UK and have, as a result, lacked balance in their portfolios. It appears, however, that investor attitudes are set to change."
A separate survey of financial advisers†, conducted prior to the launch of the New Star Indian Equity Fund, revealed that 59% of advisers thought a typical client investing for the long term should consider a portfolio weighting of up to 5% in India. The same survey showed that 25% of advisers thought a weighting of 6% to 10% in India should be considered by investors while 10% of advisers thought a portfolio weighting of 11% to 15% should be considered.
Richard Wilson, marketing director, New Star, says:
"Financial advisers are in agreement with investors that emerging markets have great potential and advisers believe a market such as India should form part of a well-diversified portfolio.
"What is most evident from the two sets of research is that investors and advisers both recognise the significant changes occurring to the economic world order. Research suggests investment in emerging market funds is poised to increase and that a new breed of emerging market funds such as the New Star Indian Equity Fund and the New Star Heart of Africa Fund are well positioned to benefit from this expected growth."
*Research conducted in association with NMG. Surveyed 334 current and sophisticated investors from across the UK.
†Research conducted by New Star. Surveyed 105 UK independent financial advisers.
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Any research in this document has been procured and may have been acted on by New Star Investment Funds Limited for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. No assurances are made as to their accuracy.
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