‘Third way’ to invest in emerging markets

US based fund manager, Parametric, has launched an emerging market equity solution for Australian superannuation funds, which claims to give investors access to a ‘third way' to invest via a rules and engineering approach.

Parametric's emerging markets equity (EM) approach had over US$15.7 billion of assets under management and included a recently awarded mandate from an Australian industry super fund.

Parametric's chief executive, Chris Briant said the strategy was designed as a ‘third way' to invest into EM, given the known shortcomings of both index-tracking and active EM strategies.

Their approach was developed to efficiently and consistently capture long-term growth of EM, while it avoided the inherent return risks of active management and concentration risks of mainstream indexes, Briant said.

"Parametric's ‘third way' investment approach is deliberately distinct from both passive and active: it is a disciplined, rules based, engineered approach to investing in EM," he said.

The fund focused on diversification and rebalancing, while it avoided the need for ‘active country', ‘security insights' or return forecasts, he said.

"Unlike many active strategies, this strategy seeks to provide the strategic benefits super funds desire, by maintaining a consistent, broad exposure to a wide range of EM countries, while managing the high cost environments inherent in these markets," Briant said.

Over the past year the fund manager had doubled their funds under management in Australia, the firm said.

"[That] tells us our implementation capabilities are very relevant to the problems funds are trying to solve today".