Sunday, 11 May 2014

Emerging Market Funds

“EMERGING MARKETS”: What do they mean???

Emerging Market Funds or also known as Global Funds are Mutual Funds that have features similar to Exchange Traded Funds (ETF’s). But Emerging Market Funds means a lot more than that in real terms. These are special type of Mutual Fund scheme which allocate their investments in the Developing Countries. The term “Emerging Market” is given to the countries whose economy is still in the developing stage and there is ample scope to usher the funds for development in these areas which offer better return as compared to developed economy. The objective of this Fund is to allocate assets in the developing countries which offer better and faster prospect of growth. The fund is used for the infrastructure, education, health, etc to pave way for rapid industrialization and growth in the region. Hence these countries need the funds to accelerate the developments.

The developing countries are mainly characterized by low per capita income, lack of industrialization, dependence of agricultural produce, low agricultural produce, disguised unemployment, low productivity, use of labor intensive technology and huge population. Thus to overcome the slow development and promote industrialization they need funds which are invested through the Fund Managers after analyzing the risk to return ratio and the country’s prospective growth and potential.

Benefits:  From Investor Point of View

The major reason for the investments in this type of region is productivity is that because of huge populations in these regions labor are very readily available and cheaply available so the ventures can be undertaken at a lower cost. Moreover the regions are generally very rich in natural resources which could be used for industrialization purpose and is easily available. So with use of advanced technology the cost of developing is further reduced and revenue generated from the venture is more. Further since the projects are required by the governments of the respective countries to usher in the reforms some leeway are also given.
Thus the potential to grow is huge in this kind of economy which is growing compared to developed ones. Hence the return on investment can be very high from these types of investments. However the risk is also high as developing countries are observed to suffer from political or social turmoil which may not be conducive for the investment.

Emerging Funds: India’s Perspective

India is a developing economy and one of the leading emerging markets of the world. However it is not only a region which attracts investment from other countries but investors from here invest in other emerging markets of the world.

India as an Investment Hub: In the 3rd Quarter of 2013-14 we have seen that most of the emerging markets have been under stress amidst slow economy growth worldwide. However India has managed to show promise in this period. The rupee has appreciated by 10% against dollar while GDP too showed a slight improvement to be at 4.8% as of September 2013 quarterly results. In comparison if you see USA,  Italy, Japan have not performed any better. India has also withstood the USA Federal Reserve Bond buying program which reflects in the performance. Thus all these factors make India attractive venue for investment.

Indian Investor’s Perspective: The domestic market has not been able to deliver the return which would satisfy most of the investors. But we do see a rally in the 3rd and the 4th quarter much to the relief of the investors. Even the Investors can gain by investing in the Global Funds as the Rupee is fluctuating a lot in the present times which could help you make some gains. Further the Asian markets such as Singapore, Malaysia and China are good places from the investment perspective so investor should look at the Funds investing in those regions.

Hence I would conclude the market has scope for everybody you just need to plan your investments in the right manner. Global Funds are also an attractive investment option apart from the conventional schemes and for Individuals who prefer taking up risky ventures. Going forward the Emerging Markets will get stronger so investment will turn up to be more viable.

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