While most emerging-markets fund strategies fell apart in 2011 (the MSCI index dropped 18%), the Somerset Capital Emerging Market Dividend Growth Fund lost only 6%. That put it in the top decile in its sector over one year. Since launch in March 2010, the fund is up 13% while the wider sector is down 1%. Why?
One reason is that manager Edward Lam "is usually a long way from consensus positions", says Patrick Collinson in Fund Strategy. So while Lam sees problems in China, where he is "positioned for a hard landing", South Africa's relative unpopularity means there's value to be found. "Stocks in South Africa, such as Shoprite and Tiger Brands, are trading on price/earnings ratios of ten to 15 compared with 30-plus in BRIC countries," he notes. "South Africa has for a long time been the consensus underweight emerging market. I like that, as I can find [many high-quality firms here] with decent growth potential."
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| Cia Cervecerias | 3.7% |
| Semen Gresik | 3.6% |
| Siam Commercial Bank (F) | 3.5% |
| China Mobile | 3.5% |
| AAC Technologies Holdings | 3.4% |
| The Foschini Group Ltd | 3.4% |
| National Bank of Abu Dhabi | 3.3% |
| Nampak Ltd | 3.3% |
| Tiger Brands | 3.2% |
| Souza Cruz SA | 3.2% |
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