Mind the gap: Global equity portfolios missing a key component

From
  • The Pacific Alliance (Mexico, Colombia, Peru, Chile) is not represented properly (if at all) in local Global equity portfolios, despite representing over 40% of Latin America’s GDP.

  • The Pacific Alliance has strong socio-economic fundamentals and market growth prospects. It is ranked eighth by size globally as an economic power.

  • The King Irving SURA Pacific Alliance Fund provides access to this material gap, with leading local manager SURA Asset Management as investment manager.

Kate Mulligan

Kate Mulligan

The Pacific Alliance has the third largest weight in the emerging markets (EM) index, yet is typically under represented, or not all, in Global equity portfolios, according to Kate Mulligan, Managing Director of King Irving Funds Management. This is despite the fact the Pacific Alliance countries have been identified as higher growth global markets, with two of the countries ranking in the top five over the next five years.[1]

Speaking at a media briefing in Sydney yesterday, Ms Mulligan said, “Commentators suggest that the annual returns for the Pacific Alliance are likely to be some of the best in international markets due to the economic, market and regulatory benefits arising from creation of this trade bloc in 2012. One expert has modelled that Pacific Alliance markets will achieve strong double digit returns over the medium to long term.” [2]

Ms Mulligan said currently, domestic portfolios have no or little exposure to the Pacific Alliance through existing Global asset allocations, although it comprises a significant portion of the EM index. The Fund’s strategy of investing in equities in the growing Pacific Alliance Region reflects the developing investor appetite for best in an unrepresented asset class, and regional investment expertise. The Fund’s investment manager, SURA Asset Management, is the leading investment manager in Latin America measured by funds under management (FUM) (over US$100b) and number of investors.

“The King Irving SURA Pacific Alliance Fund allows professional Australian investors to address this gap in their international equity portfolios with the benefits of an Australian domestic vehicle, for the first time,” Ms Mulligan said. “Our proposition for investors is an offer that is different, selective and which brings new growth opportunities to the Australian marketplace”.

Felipe Trujillo, Head of Product Development and Investment Standards at SURA Asset Management said, “With SURA AM as its appointed manager, the Fund invests in these markets with the benefit of over 30 years of investment experience and significant resources.” He added, “SURA Asset Management operates both locally and internationally, with the advantage of having well resourced investment teams located in each country of the Pacific Alliance”.

Unlike Brazil which has a focus on exporting materials to China, the Pacific Alliance allows investors to access different themes, including low cost manufacturing and a growing internal and middle class consumption story. The Pacific Alliance countries enjoy a solid foundation for long-term structural economic growth.

——–

[1] Wellershoff and Partners, CAPE around the World Update 2015 – Return Differences and Exchange Rate Movement. CIO Joachim Klement
[2] As above, value weighted returns modelled over 5 years

You must be logged in to post or view comments.