What happened today in 1987?
February 2, 2010
This day 23 years ago, Templeton launched the first Emerging Market fund: Templeton Emerging Markets (EMF).
Readers of our blog may be interested to know that if you had invested $1,000 into this fund at the time of its launch and $1,00 into a S&P 500 tracker, the Uncle Sam portfolio would have won hands down by returning 283.2 percent versus 32.5 percent for the Templeton fund. However, over the shorter term period, the emerging market fund has put on a better showing, up 48.5 percent versus the S&P 500 negative return of 19.9 percent.
What is going to happen in the nest ten years? For the best result perhaps we should toss a coin! Seriously. Before trying to answer this question, we should be aware that the majority of outperformance in emerging markets has been dependent upon sector allocation. If you created your own "Emerging America" ETF fund by sector allocation on the lines of the emerging markets (see article below), the performance between the "New" American fund and many emerging markets would hardly be noticeable. If we enter a period of relative outperformance of Consumer Staple and Health Care Sectors, the developed markets would win hands down.
Returning to the key question, "What is going to happen in the next ten years?" we believe that China will suffer a similar meltdown to Japan and to East and Southeast Asia before it. China will not disappear by any means, any more than Japan or South Korea has. However extrapolating Chinese growth over the last ten years is in our opinion unwise and too over-believed. The correct answer is "don't give it much thought." Try to concentrate on trying to unearth the new "Super Stock" that will benefit from the emerging generational demand of Generation Y.
Source: Google Finance
