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Investors turn to emerging markets, Asia-focused equities – bfinance report

Searches for emerging markets and Asia-focused equity managers increased more than 100% in the year ended Oct. 1 at the expense of U.S. and global equities, show data from bfinance.

The investment consultant said it had seen "dramatic shifts" in new equity allocations and portfolios, with changes in manager selection patterns showing a preference for emerging markets equity and Asia-focused equity firms.

Data show 28% of all new equity manager selection projects — according to bfinance client data in the 12 months ended Oct. 1 — were for emerging markets or emerging Asia, vs. 15% for the previous year.

In contrast, global equity allocations made up 24% of total new equity allocations in the year, vs. almost 40% in the previous year.

In a report on the data, "New Equity Perspectives: Emerging markets, ESG and the active/passive debate," bfinance said the resurgence in investor appetite for emerging markets "is proving to be the most significant allocation trend of 2017."

The report referenced the "positive macro tailwinds witnessed in the aftermath" of the election of Donald Trump as U.S. president, which "simultaneously sent emerging market equity funds to the top of the performance rankings — especially those with lower exposure to Brazil or commodity-sensitive markets such as Russia."

The greater feasibility of segregated accounts due to improved market liquidity, "the deepening bench of specialist regional country managers and the stronger investor demand for top-down macro insight" were also highlighted as significant changes within the emerging market equity manager universe "since the last great surge in investor appetite" in 2009 to 2010.

The report said another noteworthy development in emerging markets equities is the increasing relevance of environmental, social and governance factors in the asset class.

"The shift in new equity manager selection patterns among bfinance clients has really been very significant, particularly the move toward emerging markets, Asia and Japan," said Justin Preston, senior director and head of equity at bfinance, in a statement accompanying the report.