The fund manager employs a long / short equity strategy. With long positions where the manager expects stocks to increase and short is where he expects them to decline. By doing this he minimises market exposure, while profiting from stock gains in the long positions and price declines in the short positions. The idea is that together they generate a positive return whatever the market is doing.
For many years investors have enjoyed healthy returns from emerging markets. The story is compelling and supporters will point to strong GDP and earnings per share growth as drivers for share price appreciation.
In recent months we have seen a mass exodus from emerging markets and extreme volatility. It is now an extremely volatile unloved sector where investors are unwilling to see through the short term pain to the long term growth potential. In fact with strong returns from developed economies investors prefer to opt for these on the basis of how they have performed in recent months and their greater predictability.
For investors looking to invest in emerging markets, or already investing who are looking for a less volatile fund, then the BlackRock Emerging Markets Absolute Return Fund could be an option. Currently the fund is offshore with currency options being Sterling, US dollar or Euro.
The fund doesn’t state a target return although speaking to the team they are looking to achieve between 5 to 7% with bond like volatility. It has only been operational since November 2012. 2013 was a difficult time for Emerging Markets and the fund was able to return 4.8% during this period. Therefore my feeling is that this sits perfectly either as an investment on its own or blended with a pure growth emerging market growth fund.