Emerging Markets: Macropolitical risks continue to dominate

In early 2016, hedge fund Nevsky Capital decided to call it quits after 15 years of successful asset management. One of the reasons for the closure is that since the GFC, emerging markets (EMs) are breaking away from the transparent ‘Washington Consensus’ model and are now prone to much less predictable nationalistic policies. ‘Washington Consensus’ laid the foundation for almost a decade of growth and prosperity across EMs. During this extended period of stability, EM investing was quietly folded under the wing of traditional bottom-up security selection. The efficacy of this approach has been severely challenged since the GFC, where re-emerging macro and political risks have essentially overwhelmed micro risks. Investing in EMs has clearly become more difficult, but where there are challenges, Nikko Asset Management’s Multi-Asset team believes there are also opportunities. In this inaugural quarterly report, we summarise our current views on EMs and where we are seeing the main challenges and opportunities. (VIEW LINK)