Ninety One began in an emerging market, with the aspiration to match the best the global asset management industry could offer.
Today, I believe we are living in a volatile environment where current processes – including ways of allocating capital – may not work. After the shift to a multi-polar world, portfolio diversification and capital allocation need to be reconsidered.
I see an investment landscape rich in nuance and with many risks, and also full of hidden opportunity. Ninety One’s task is to uncover that opportunity for our clients.
Investors with long horizons like pensions savers need to ask: where is the world going to be in 2050 or 2060? The economic centre of gravity is shifting east, and will do so more decidedly as India rises. There is momentum behind emerging markets that has nothing to do with politics.
Around the world, centres of excellence are developing, facilitated in part by the internet. Where many developed markets are often slow in responding to trends like mobile communications and AI, emerging markets are often moving faster.
There are risks. We are yet to see the full impacts from the rapid rise in the cost of money. Understanding them will be key for investors in both advanced and emerging economies, and holding quality companies will be important. But be cautious in being too negative on the US: it may go through a tough time, but its energy and creativity need to be respected.
From the perspective of Western savers, too many people in defined-contribution pension schemes do not have enough to retire on as they have de-risked and not contributed enough. Emerging markets, as well as sustainability, are potential components that can be used to address this, and should be part of the debate on how to deliver the returns investors need.
Also, emerging markets need capital to modernise, not least to decarbonise and make progress towards net zero. By allocating to emerging markets, the UK and other developed nations can apply their savings pools to drive progress towards these broader objectives while meeting their financial targets and fiduciary obligations.
General risks. All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.
Specific risks. Geographic / Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that the resulting value may decrease whilst portfolios more broadly invested might grow. Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Derivatives: The use of derivatives may increase overall risk by magnifying the effect of both gains and losses leading to large changes in value and potentially large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. Credit Risk: Where the value of an investment depends on a party (which could be a company, government or other institution) fulfilling an obligation to pay, there exists a risk that the obligation will not be satisfied. This risk is greater the weaker the financial strength of the party. The Net Asset Value the portfolio could be affected by any actual or feared breach of the party's obligations, while the income of the portfolio would be affected only by an actual failure to pay, which is known as a default. Default: There is a risk that the issuers of fixed income investments (e.g. bonds) may not be able to meet interest payments nor repay the money they have borrowed. The worse the credit quality of the issuer, the greater the risk of default and therefore investment loss. Liquidity: There may be insufficient buyers or sellers of particular investments giving rise to delays in trading and being able to make settlements, and/or large fluctuations in value. This may lead to larger financial losses than might be anticipated. Sustainable Strategies: Sustainable, impact or other sustainability-focused portfolios consider specific factors related to their strategies in assessing and selecting investments. As a result, they will exclude certain industries and companies that do not meet their criteria. This may result in their portfolios being substantially different from broader benchmarks or investment universes, which could in turn result in relative investment performance deviating significantly from the performance of the broader market. Interest rate: The value of fixed income investments (e.g. bonds) tends to decrease when interest rates rise. Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company. Concentrated portfolio: The portfolio invests in a relatively small number of individual holdings. This may mean wider fluctuations in value than more broadly invested portfolios. Emerging and Frontier market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. An investment in the Fund is speculative and involves a high degree of risk. The program is not suitable for all investors. The shares are illiquid with restrictions on transferability and resale. Each investor or prospective investor should be aware that they may be required to bear the financial risk of this investment for an indefinite period of time. An investor may lose all or a substantial part of its investment. There can be no assurance that the investment objectives of the Fund will be achieved. The managers and portfolio structure provided herein is subject to change. Commodity-related investment: Commodity prices can be extremely volatile and losses may be made.
