2023 was a largely torrid time for emerging markets, with dollar strength and Chinese weakness combining to dent sentiment towards the asset class.

With this in mind we thought it worthwhile to check up on how EM equity funds fared in our database across 2023. 

Last time we looked into this, Asset Allocator revealed three active funds had become the dominant players in this sector, as far as fund selectors are concerned. 

Redwheel Global Emerging Markets, JPM Emerging Markets Income and Fidelity Emerging Markets are the three in question, and these remain the favourites, though their popularity has waned somewhat over the course of the year. 

Both Redwheel and Fidelity some saw sales in 2023, so now the JPM Emerging Markets Income Income fund is back on top as the most popular EM fund among our DFMs.

The JPM fund is £823mn in size and has delivered first-quartile returns over five years, despite global uncertainty. Plus it has a yield of 3.78 per cent which puts it close to the top of the pile (only four funds in the sector have a higher yield).

According to our sentiment indicator, 43 per cent of the allocators we cover expressed a positive view towards emerging markets going into 2024. This is broadly similar to the level of positivity expressed in September but emerging markets is one of only four equity regions which allocators are positive towards.

The potential for US rates to have peaked is perhaps leading allocators to look again at an asset class that has been about as popular as a Turkey sandwhich in January in recent years. 

David Hambidge of Premier Miton offered us his thoughts as an allocator who expressed positive sentiment on the market.

“It has been a very long time since emerging market equities have put in a sustained outperformance and the poor performance of the Chinese stock market has resulted in another year of lacklustre returns for the emerging market index,” he said. “With valuations looking attractive, it’s perhaps time for those sitting on the side lines to reconsider, although with US stocks again outperforming they will take some convincing.”