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Published on March 13, 2008

Contrary to most fund-management firms here, its equity-selection method, often traversing geographical borders, dictates that the firm manage all of its own funds. The Luxembourg-based Aberdeen Global Emerging Markets Fund is one such fund, holding its initial public offering next Monday under the name of the Aberdeen Global Emerging Growth Fund in Thailand.

Just as the international investment community can no longer make the sterile US economy look attractive - many of these major institutions are themselves prey to the sub-prime and non-performing-loan poisons - the emerging markets are marching from strength to strength, thanks largely to once-small local companies that have morphed into global giants.

Management and finances in these companies have improved over the years, said Christopher Wong, investment manager for the Asia-Pacific. "Gearing is coming down in emerging-market companies, and cash-flow growth is strong," he said.

Investment manager Adithep Vanabriksha said: "The top-performing companies have adapted well, generating growth as costs keep rising." Although corporate governance remains a big issue in Asia - Hyundai's slush fund comes to mind - Wong said Aberdeen took an active role in "talking to management", presumably to steer them away from white-collar mishaps.

Confidence is unshaken in its top holding, Samsung Electronics, with 5 per cent of the total portfolio. Although Aberdeen steers clear of companies with "political patronage" - current South Korean president Lee Myung-bak was Samsung's CEO - Wong sees the price-to-earnings (P/E) ratio as still attractive.

"You are also protected when buying on a P/E basis," he said.

Benchmark-wise, the fund is rather contrarian, at least relative to current trends. Although diversified, compared with Morgan Stanley Capital International's Emerging Markets Index, it has 6.5-per-cent more assets in Latin America and goes light on Chinese-themed stocks, which Wong says are bubbles.

Since implementing its Real Plan in the early 1990s, pegging and then unpegging its currency to the US dollar, Brazil has been spared the rod of Zimbabwean-style hyperinflation, and its forecasted 4.5-per-cent inflation this year is a far cry from China's double-digit inflation.

A significant portion of fund monies was understandably channelled to Indian and Southeast Asian stocks. With legions of new middle-class consumers emerging across regions, the fund is betting on domestic consumption to boost its stock values: telecoms in China, financials in Asia and South America, consumables in South Africa and mining and minerals in Brazil.

Although its return is rather impressive, it still underperforms the benchmark. This prompts the question of whether investors would be better off with a passively managed fund.

Ki Nan Tsui

The Nation