Advisers ready to test international investing again

Interest in Europe, emerging markets is climbing, Aberdeen survey shows

Sep 18, 2013 @ 2:06 pm

By Megan Durisin

More than half of financial advisers are ready to invest overseas, turning the tide on the year's trend of passing over international markets to funnel funds into safer domestic stocks.

Sixty percent of more than 300 registered investment advisers surveyed by Aberdeen Asset Management plan to increase their allocation to international equities over the next year.

A report by Bank of America Merrill Lynch Global Research also shows that Europe, in particular, slowly is becoming a more popular investment, with 36% of the global asset allocators surveyed overweight in the region.

Allocations to eurozone equities have reached their highest level since May 2007, according to the report.

In addition, interest in emerging markets, which have performed dismally this year, is stabilizing, according to the BofA report.

The near-term noise on the volatility of international markets has put blinders on some advisers, and many remain underweight in overseas stocks, but that is beginning to change, said Mickey Janvier, head of business development at Aberdeen Asset Management.

His firm recently launched a European equity fund, and more advisers are beginning to examine the region's economies more closely, he said.

“In a short-term matter, we've seen the U.S. rally, and we've seen money pour out of international equity back to domestic equity,” Mr. Janvier said. “It's only a matter of time before good old-fashioned asset management matters.”

David Darst, chief investment strategist of Morgan Stanley Wealth Management, said that his firm remains equal weight in Europe and hasn't yet increased its allocation there, but the zone could become more attractive later this year.

His team is monitoring the effect of Germany's Sept. 22 federal elections to see if the outcome spurs more spending, he said.

“The economy seems to have bottomed out. It seems to be growing slowly,” Mr. Darst said of Europe.

“For us, we need to see that next catalyst,” he said.

Mr. Darst thinks that developed countries, including Japan, the United States and those in Europe, will outperform emerging markets in growth throughout the rest of the year.

His firm hasn't increased its holdings in emerging markets, but investments in countries such as China and Mexico are bound to pay off, he said.

“We like Mexico because of the proximity to the U.S. and the integration with the recovery in manufacturing in the U.S.,” Mr. Darst said, citing oil and rail stocks in the country as potentially wise buys.

Jerry Wade, chief investment officer of Wade Financial Group Inc., said that increasing international investments is a priority, especially in emerging markets, which he thinks are poised for a rebound.

His group's no-load tactical long-short mutual fund (WADEX), up about 6.7% year-to-date, exited its holding in emerging markets when they began to sag this year. Two weeks ago, the fund went halfway back in on its emerging-markets allocation.

Mr. Wade said that he plans to go fully back over the next few days, with the stocks making up about 7% of all the fund's assets.

That percentage could double in the next couple of months, he said.

“On a longer-term basis, we expect emerging markets to crush U.S. markets,” Mr. Wade said. “We're getting pretty bullish.”

Mr. Wade said that Europe is also becoming a “solid buy,” and his group's funds have assets there as well.

Although he doesn't see Europe as the same “screaming long-term buy” as emerging markets, he expects investment opportunities to strengthen there soon.

“We think the fire sales are in emerging markets,” Mr. Wade said. “If prices weaken further in Europe and some of the other countries, we think some of those opportunities will get pretty juicy as well.”


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