A quantitative perspective: Emerging Markets
Emerging markets with their dynamic economies have been growing fast and steadily for years. Economic weights in the global markets have changed as a result of the rising significance of emerging markets as sales and production markets on the one hand and the disproportionately strong economic growth in the respective countries on the other hand.
Capital markets benefit also from this trend. They have recorded dynamic growth for years and continue to offer promising upside potential though entailing various but manageable risks.
The large capital flows, as a result of a more global asset allocation, will have a significant impact to the trends in the asset classes of Emerging Markets. An investment therefore appears promising from a strategic point of view.
Apart from the attractive investment opportunities, Emerging Markets also make sense as a diversification of the portfolio. Today, risk-conscious investors are able to put money into most asset classes on those countries.
Berenberg offers quantitative strategies for investments in emerging markets.
Advantages and benefit of quantitative investment strategies
- Systematic and rule-based investment decisions produce a high degree of transparency
- Model-based investment approaches lead to a clear performance characteristic and thus to greater transparency of the performance
- Elimination of the key-man risk
Berenberg Emerging Markets Bond Selection
In the bond markets, mutual funds or selective government or corporate bonds from the Emerging Markets with attractive interest rates are an interesting alternative and offer value for yield-searching investors in the current low-interest rate environment.
Systematic sovereign selection process with continuous risk monitoring
The Berenberg Emerging Markets Bond Selection mutual fund combines an active strategic country allocation with a continuous risk monitoring process at the sovereign level. The underlying securities are largely denominated in US dollar.
The strategic country selection is based on a fundamental scoring model, whereas the forth following individual country weighting is done via econometric analysis. The fund’s currency risk is statically hedged via rolling FX forwards.
Berenberg Emerging Markets Equity Selection
Emerging market stocks offer abundant investment opportunities based on global diversification and company specific growth topics.
Active management and a quantitative investment process
The Berenberg Emerging Markets Equity Selection equity fund is managed by a purely quantitative selection process. Apart from the fundamental assessment of a company, the selection of stocks takes into account in particular the level of risk involved in the respective stock.
A quantitative selection process which is based on the MSCI Emerging Markets universe selects fundamentally undervalued stocks showing a resistance in falling markets at the core of the active investment strategy. Country and sector specific aspects do not play any role in the process.
An explicit risk analysis is to reduce the loss potential resulting from the stock price risk of the selected stocks.
Berenberg Currency Protect Overlay
Emerging market currencies are another suitable addition to investments in Euro or US dollar. Due to regional and political tensions such as, in particular, exogenous shocks and inflation, an investment in emerging markets entails high risk, though.
The dynamic management of equity market risks as well as interest rate risk can have a risk-reducing effect on an emerging market portfolio.
Within the context of active risk management, currency risk can thus be systematically reduced or, in the form of a separate strategy, also be taken.