CAPITALISM AND A RED COLONEL’S DAUGHTER
Jeff Prestridge

Daily Mail
941/Capitalism-red-colonels-daughter.html
3 October 2009

Marina Akopian has been managing money in emerging markets for the
past 13 years, first at Pictet Asset Management, then at Barings and
for the past three years at boutique investment house Hexam Capital.

During this time she has had to deal with a catalogue of economic
and financial crises that have caused emerging markets to go into
near meltdown. But through it all she has remained convinced that
investing in emerging markets is the way forward.

‘Investing in emerging markets is no longer a luxury, an adventure,’
she says, sitting in Hexam’s offices overlooking the Old Bailey in
central London. ‘It’s a necessity. Investors in the UK cannot afford
to ignore emerging markets any longer.’ Armenian-born money manager
Marina Akopian says investors should not ignore countries such as
Russia and China

Armenian-born money manager Marina Akopian says investors should not
ignore countries such as Russia and China

Akopian, 36, who was born in Armenia and whose late father was
a colonel in the former Soviet army, then reels off a series of
statistics as to why she is so adamant that the emerging markets
investment story is so compelling.

‘Look, next year China will record ten per cent growth in its gross
domestic product,’ she says. ‘This is after nine to ten per cent
growth this year.

More…

* Fund supermarket (thisismoney.co.uk) * Investing: Latest news and
tips (thisismoney.co.uk)

‘In the developed world, GDP will contract this year by anything
between two and four per cent. Although growth will resume next year,
it will be anaemic compared with that seen in developing countries
such as China, India, Brazil and Russia. We’ll be lucky to see GDP
growth in the developed world of two per cent.’

There are other figures she is keen to impart. India’s share of
global GDP is greater than the UK’s while China’s is bigger than
that of Japan. The combined GDP of Brazil, Russia, India and Chi
Emerging markets account for 80 per cent of the world’s population,’
says Akopian. They account for 75 per cent of both the world’s land
mass and foreign exchange reserves and 50 per cent of global GDP. But
when it comes to the value of world equity markets, they represent
only 12 per cent by market capitalisation. This is a massive paradox
and one which must change.’ emerging markets

Although Akopian admits she may be biased – Hexam invests only in
emerging markets – there is no doubt that an increasing number of
investment advisers believe that clients should be gently increasing
their exposure to emerging markets. Among them is Darius McDermott,
managing director of London-based Chelsea Financial Services.

He says: ‘On average, my clients have just under two per cent exposure
to emerging markets. I now feel investors should be looking to have
between five and ten per cent exposure depending on risk appetite.

‘I see emerging markets as a longterm investment story. Their economies
are less indebted and have more growth potential than their Western
counterparts.

‘Their new middle classes will ensure consumption of everything from
diamonds to flatscreen TVs while the West will continue to buy their
exports. They are also commodity rich.’

Even keener is Mark Dampier, investment funds expert at Bristol-based
Hargreaves Lansdown. He believes that anyone with an investment
horizon of 20 years or longer should have at least 20 per cent of
their investments in emerging markets.

‘The industrial revolution we are seeing in emerging markets, and
particularly in China, is arguably the last great global growth story,’
he says. It’s a story I’ve been arguing for the past 15 to 20 years
and it’s one I remain convinced by. Investors should not miss out.’

One couple who believe in the case for emerging markets are Damian
and Sue West from Lanark. Between them, Damian, 40 this week, and Sue
hold a number of emerging markets funds, including Aberdeen Emerging
Markets, First State Greater China Growth, Ignis Hexam Global Eme
Russia and Greater Russia and Jupiter China.

Plotting revolutions: Savers Damian and Sue West, with Luke and Lucy

Plotting revolutions: Savers Damian and Sue West, with Luke and Lucy

While Damian’s funds are held within an Isa, Sue’s form part of her
selfinvested personal pension (Sipp), administered by Hargreaves
Lansdown. The couple have two young children, Luke, 7, and Lucy,
5. Damian is selfemployed and sells agricultural spare parts direct
to farmers.

The unpredictability of his earnings means he invests only in equities
or equity funds when he has enough spare funds. Sue, 40, helps Damian
with his paperwork.

‘I put most of my savings into cash Isas,’ says Damian. ‘But if I
have a good month I top up my investment Isa.’

Current rules allow savers to put a maximum of £3,600 per tax year
into a cash Isa and a further £3,600 into an investment Isa.

Alternatively, the full £7,200 can be put in an investment Isa. From
Tuesday, these limits rise for anyone born before April 5, 1960 to
£5,100 (cash) and £10,200 ( overall). For those born after that date,
the limits rise from the start of the new tax year next April.

Damian made ‘small’ investments in Ignis Hexam Global Emerging Markets
and Aberdeen Emerging Markets in June. The money came from a failed
investment in New Star Heart of Africa that was wound up following
a run on the fund.

Damian says: ‘I wouldn’t invest all my money in emerging markets,
I’m too cautious for that. But it does seem logical to invest in
the world’s developing markets – to capture the growth before these
markets become established.’

There are plenty of options available for investors in emerging markets
(see below). But investors need to keep their eyes open and be prepared
for a rollercoaster ride.

Since 1987, there have been eight short periods when emerging market
funds have on average recorded price falls of 20 per cent or more.

Three of these have resulted in losses greater than 50 per cent –
in the wake of Black Monday in October 1987, the Asian financial
crisis of 1997 ajor investment bank Lehman Brothers.

Although emerging markets have always come back strongly from these
setbacks, such volatility means investment timing is crucial. It is
a point that Chelsea’s McDermott says investors should not overlook.

He says: ‘Looking at where we are today, you could say the easy
money has already been made from emerging markets. The average
emerging markets fund is up 65 per cent since March this year and
some professional investors are taking some gains.

‘That said, with emerging markets, it’s always a case of three steps
forward and one back so we could well see a correction in the coming
months, which would signal another buying opportunity.

‘The best way for investors to deal with this inherent volatility is
to invest monthly through an investment Isa.’

Hargreaves Lansdown says that a regular £100 per month investment in
the typical global emerging markets fund since October 1987 would now
be worth about £79,500 – despite the sharp setbacks of last year and
1997. The same investment in the average UK-invested fund would be
worth £56,400.

Akopian, who is one of four managers on the Ignis Hexam Global Emerging
Markets fund, says: ‘There remain a lot of misconceptions surrounding
emerging markets.

‘It’s our job as fund managers to challenge them. The future is not
orange. The future is emerging markets.’