EM Declines and Subsequent Allocation

BenWP

http://blogs.barrons.com/emergingmarketsdaily/2015/03/13/emerging-markets-markets-sink-2-5-for-week-unloved-but-resilient/?mod=djemb_dr_h
This linked blog post from Barrons with analysis of performance and prospects of various EM economies from Deustche Bank has me wondering about my own allocation to emerging markets. For the last several years I've been reading about how this year is going to be the one for EMs, that dough is flowing into EMs, that valuations are favorable, and so forth. Fact of the matter is, my EM and FM funds (all the usual MFO suspects from Matthews, Grandeur Peak, Aberdeen, Morgan Stanley, and Lazard) haven't done squat since 2011, relative to my US holdings. I have reduced exposure in recent months, but haven't closed out any positions. Wondering how members are dealing with EMs. What are you taking for queasiness?

Crash

My EM is in SFGIX (2.67% of portf.) and partly in PRASX, with both developed and developing markets. PRASX = 14.9% of portf.
These countries and these funds run in streaks, often. As long as you trust your choices, strap yourself in. Don't bail.

JohnChisum

Crash is correct. You have to have a long term vision on these funds. Envision how much India will advance in the next decade or two. Or, Vietnam, Malaysia, etc. Some regions will advance over others. Will aggressions slow the advances in Eastern Europe? When will Africa ever advance?

The key is to keep your allocation in proportion to your risk tolerance. 5-10% is an average number.

jlev

I'm rebalancing to keep to about 10% every six months. But again my time frame is about 3 decades and I'm far from an expert

Old_Skeet

@BenWP,

I think of emerging markets as a minor sector position within my portfolio. From review of my most recent Xray analysis I have about a five percent allocation to emerging markets. The three emerging market funds that I own are NEWFX, THDAX, DEMAX.

Since, I have other funds that, at times, carry good exposure to emerging markets I am thinking that I'd like to see them increase their allocation to e/m before I start increasing my holding in my e/m funds themselves.

With this I have been looking ... but, so far, taken no direct action myself.

Old_Skeet

ron

I owned ODMAX (no load) but sold a couple weeks ago but holding TGEIX in a couple IRA/Roth accounts.

Kaspa

In my buy-and-hold portfolio, besides whatever exposure is there in my global bunds, I own WAFMX for exposure to the frontier markets. In my momentum portfolio, I own EEM or VWO if it rises to the top, which has not happened for a very long time now. Current top ETFs: XLV, VO, TLT and VNQ. The last two are borderline and may drop out soon, but I won't sell them till they do.

BenWP

@Kaspa: In a way, I have a momentum portfolio, but I've never called it that. It's that portion of my non-retirement savings that I trade pretty actively, using MFs, ETFs, CEFs, or stocks. I agree with you that Emerging Markets have lacked momentum for some time now. Just read annual report of MFMIX. The decline in oil prices has severely affected FM stocks and the manager thinks a recovery is not imminent. Lots of EM and FM countries rely on the sale of "stuff," and stuff isn't fetching much these days.

Old_Skeet

My emerging market funds did well today.

Kaspa

VNQ has surprised over the last few days by upward strength. Glad that I followed my system and did not sell.

Old_Skeet

@BenWP

Hi all,

About BenWP's observation about E/M ... My funds moved upward over the past week. I've been watching but so far I have made no direct move to increase my allocation. Form reading Ben's earlier post he indicated that he paired his postion back. I am still with my standard base line allocation of about 5% of my overall portfolio in emerging markets. Since Feburary 27th my E/M funds, combined, are down about 1.1%.

Just thinking now ...

What are your current thoughts and rating on the asset class might be? Buy or increase ____ Sell or decrease ___ Hold ___

For me, I am holding.

Old_Skeet

Ted

@MFO Members: Question ? Where is it written that you must own a EM Fund. The average total return on EM Funds over the last five years is 1.77%. VFINX is up 14.92% during that period of time.
Regards,
Ted

BenWP

I have been aggressively allocated to International and EM for several years. I raised the issue because I feel as though I'm fighting the tape, so to speak. Ted's latest post demonstrates this. Grandeur Peak funds I hold have been disappointing for quite a while now and MACSX has hit a rough patch as well. FMs are weak since the oil price drop. I reduced GPEOX, GPGIX, GPGOX, and MFMIX, but cherry-picked by adding some INCO, thinking Indian consumer stocks will be winners long term.

scott

I still say Abbott Labs (ABT) is the most enjoyably boring play on EM, with about 50% of revenues from EM and the stock is conservative to put it lightly. International Flavors and Fragrances, which has been around for 125 years or so, is also about 50% EM. (IFF). I own both. As for EM, I continue to own RIMIX and a few individual names but less EM than I used to.

EM I think remains a compelling long-term theme but it's not been a good few years. I mean look at Wintergreen's attempts to play the EM consumer, with Macau stocks (obliterated) and luxury goods (which were hurt by the crackdown in Asia on luxury gifting.)

SFGIX is probably the most interesting to me from the standpoint of the growth and income mix.

Crash

Yes, I own much less in EM than I did only last year. My only pure play is SFGIX: 2.69% of portfolio. TRAMX (frontier), 5.95% of portfolio, PRASX is 15.06% of portf....
M* X-ray tells me I own 25% foreign equities. Though I pulled out of PRESX, I still have 3.26% in developed Europe, and 0.7% in emerging Europe. And 13.1% developed Asia, 15.53% in Emerging Asia.

Canada and US: 55.01%
Bonds of all sorts: 37% of total.