U.K. investment firm Aberdeen said that its survey of financial advisors showed that despite a strong dollar, they are still buying and holding emerging markets for clients. In fact, most say they will allocate more money to emerging markets than to the U.S. over the next year.
Despite ongoing geopolitical turmoil across a range of developing countries and the impending hike in U.S. interest rates that is expected to slow growth in emerging markets, financial advisors say they are bullish, Aberdeen's survey of 100 advisors showed. The survey was conducted in September.
Some 88% of respondents indicated they have not reduced their clients’ exposure to emerging markets because of recent political turmoil in Russia or the Middle East. When presented with a range of asset classes, 41% said they are most likely to increase allocations to emerging market equities over the next 12 months. This was higher than U.S. equities (31%), alternatives (14%) and non-U.S. international developed market equities (14%).
“Although recent headlines can cause worry for the markets, advisors recognize that an allocation to emerging market equities over a long period of time is an important component of any growth portfolio,” Devan Kaloo, Head of Global Emerging Markets at Aberdeen Asset Management, said in a press release on Tuesday.
Similar to emerging market equities, advisors surveyed said they expect emerging market bonds to grow more over the next 12 months than other asset classes. Some 38% favor emerging market bonds, both sovereign and local currency bonds. This compares to U.S. high-yield bonds (24%), U.S. investment grade corporate bonds (23%) and international developed market bonds like euro (15%).
