New York–based Lenox Advisors is increasingly optimistic about investing in emerging markets, particularly emerging-markets equities. “The primary way is in some sort of diversified fund that has exposure to China, India and Brazil,” says CIO David Carter.
The firm leans toward using an actively managed mutual fund because emerging markets are relatively less efficient, he notes, giving a manager a better chance of picking stocks to outperform the index. “Forward-looking valuation multiples are generally lower than in developed markets like Europe, but many of these emerging nations have very strong fiscal balances and managed through the Great Recession remarkably well,” says Carter.
The $1.2 billion wealth management firm will also make opportunistic country-specific bets. For example, countries bordering China, such as Vietnam, are benefiting as wages and other expenses are rising in China. As China’s currency may appreciate, other countries may become the new low-cost producers. To combat client concerns about future interest rate increases, Lenox is looking at floating-rate funds and more hedging strategies such as merger arbitrage, where shorts are built into the strategies.
— Private Asset Management
