Investors are looking towards emerging markets to rescue their ailing pensions, according to investment experts.
Around 20% of those approaching retirement want to boost their funds by switching from less risky funds to emerging markets in the hope of souping up their returns.
Many are looking at specific countries such as China, India and South Korea, while the rest are taking a broader view of developing economies like South Africa and Brazil, says fund manager Baring Asset management.
The firm explained this was the highest number of investors moving money into emerging markets since 2009 and a slight increase on investors favouring the sector last year.
Investors were split on where they wanted to put their cash – 8% opted for China, India and South Korea, a similar number wanted to invest in emerging Eastern European markets, especially Poland, while 4% were happy to live with even more risk by exploring the returns offered by frontier markets, mainly in the Middle East and Asia Pacific.
Don’t ignore emerging markets
The research carried out by Barings found that younger investors were also more confident about staking cash in emerging markets.
Twice the number of 18 to 24 year olds (15%) are also willing to consider frontier and emerging markets than 55 to 64 year olds (8%), while only 1% of those approaching retirement would shift into investing in BRICS economies (Brazil, Russia, India, China and South Africa).
Rod Aldridge, an investment expert at Baring Asset Management, said: “Lots of countries fall under the banner of emerging and frontier markets and the sector represents a large percentage of the global economy.
“Our view is that emerging market investments can play a part in any balanced portfolio providing investors understand the risks.
Investor confidence in China
“Although concerns are regularly voiced over emerging market performance, the sector is likely to play a greater role in the world economy in the future and we do not think investors should simply ignore the possibilities for growing their portfolios in the long term.”
The view is supported by other financial experts, including those at Lloyds Bank.
Research by the bank revealed a surge in confidence towards emerging markets from investors backed by more stability in the Chinese economy.
“The central bank intervention in cutting rates is giving investors more confidence in China, and that is also rubbing off on other emerging markets,” said a spokesman.
