Vincent Strauss (gérant du fonds Magellan entre autres) conseille de vendre son fonds et d'acheter des ETF sur les marchés émergents !

Leading emerging markets manager Vincent Strauss from Comgest has warned investors that emerging market excess means that he and other fund managers like him face a period of underperformance. In order to benefit from an emerging bubble in the next two years, he says ETFs could be a better option.

Paris-based Strauss, who runs some €7.9 billion in emerging market equities and has more than 30 years' experience in the area, described himself as 'happy but nervous' about the increasing popularity of emerging markets among investors. He thinks huge flows to the region from the West will mean rising markets in the coming years and a period of excess.

'The big story of the next two years will be that the PE ratio of emerging markets will go up and we will reach excessive valuations,' he said.

All the ingredients are there for a bubble to develop, the manager of the Magellan and Comgest Growth Emerging Markets funds thinks. 'Today you have to be in equities by default, and by default again it makes sense to be in emerging markets. To have a bubble like development you need interest rates to be too low and you need a good story, something that is obvious. What is obvious to everyone today is that growth in developed economies will be more or less flat... of course everyone wants to increase their exposure to emerging markets.'

Strauss is honest about his prospects for when the real emerging market excess kicks in. 'Classic, conventional fund managers will suffer. People like us, First State and Aberdeen will all do a good job in the first stage, but in the next stage when the real excess begins we would all probably be too risk averse and defensive.'

He thinks for investors wanting to capitalise on emerging markets excess, ETFs may be a better bet than fund managers like him. 'A lot of investors still want to get exposure to emerging markets, the game is far from over yet. We are happy because we have more funds under management, but we are not comfortable with what we project. We are telling our customers that at some stage to capture the beta of emerging markets they will have to get out of our funds and buy ETFs. We are being honest. When markets are moving like the north face of the Matterhorn, we always underperform. We are low beta fund managers and our clients don't expect us to become opportunistic.'

However, if one wants to ride the wave and profit fully from an emerging market bubble, timing one's exit is clearly crucial, according to Strauss. 'When the emerging market bubble bursts, ETFs will be absolutely crucified,' Strauss warns.

Strauss, one of the more outspoken fund managers in Europe, also had strong words to say about the state of the Western banking system following the crisis. 'Nothing has been addressed, the self regulation of banks is a joke. Now they are a legal Madoff, especially with regards to derivatives- which are a zero sum gain. The new alchemy is 1+1=3 when it comes to bank's derivatives. It is all like a Ponzi scheme.'

(Philip Haddon - Citywire - 25/01/10)