Shuli Ren, the Emerging Markets reporter for Barron’s, posed the question “How Much Weight Should Emerging Markets Have In Your Portfolio?” She spoke with Steve Blumenthal about exposure in Emerging Markets and the CMG Global Equity Strategy. The Strategy, structured with Absolute Return Partners, offers a new mutual fund CMG Global Equity (GEFAX) that uses quantitative scoring methods. This method screens companies that can generate higher Sharpe ratios
The CMG Global Equity Strategy portfolio consists of 50 equally-weighted stocks (2% each), selected at the end of May each year when companies release their annual reports. This May, from a universe of 35,000 publicly traded companies across 150 countries, about 3,600 companies met market liquidity requirements.
CMG then scores up companies by two dimensions: 1. financial health – how strong a company’s balance sheet is, and how consistently strong it is; 2. earnings growth – how well a company delivers its earnings and how consistent its earnings are. They pick the top 50 stocks based on these two dimensions.
CMG Global Equity re-balances its portfolio once a year. Since its inception in 2008, this selection method’s Sharpe ratio – a measure of long-term returns adjusted for risk – is 0.86, outperforming MSCI ACWI’s 0.28 or S&P 500′s 0.43.
Ten emerging markets companies made the cut this year: Thailand’s media company BEC World (BECVY), China’s mobile telecom China Mobile (CHL), oil producer CNOOC (CEO) and Internet firm Tencent (TCTZF), India’s IT services provider Infosys (INFY) and Cognizant (CTSH), Hong Kong’s cosmetics retailer Sa Sa Holdings, which mostly sells to Chinese consumers, South Africa’s apparel retailer Truworths International, Brazil’s footwear retailer GRENDENE, and Indonesia’s cement maker Semen Indonesia (PSGTY).
Steve also spoke to theStreet about emerging markets, September 27, 2013. Said Steve: “We speak and work with hundreds of independent financial advisors. When they build their portfolios they have a piece of emerging markets in their equity bucket. Maybe it’s 3 to 5 %. We don’t play emerging markets specifically, we play world markets. But we see emerging markets, in a 5 – 10 year horizon, as a great opportunity.”
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