Hedging Emerging Markets

Macro economic view – Emerging markets are set to continue to offer a significant growth premium over their developed peers, driven by continued structural reform, continued demand for commodities, low levels of debt, and growing consumerism.

Over the shorter term, there are some risks posed by increasing inflation, and the knock on effect of more sluggish growth in developed economies. Even then, we still expect mid-high single digit GDP growth in emerging markets in 2011, versus low single digit growth in developed regions, with the aforementioned economies continuing to lead the global recovery (accounting for about half of global GDP).

Investing for the short and long term - In order to benefit from the longer term positive trends of the emerging economies, whilst insulating ourselves against (and indeed benefiting from) increased shorter term volatility in these markets, we suggest a long/short strategy across multiple asset classes, e.g. equities, fixed income, currencies and interest rates.