But recent investor interest suggests sentiment may be shifting again and momentum could be building.<\/p>\n
\u201cWith lots of political risk, China is very divisive but it\u2019s one we\u2019ve been asked about a lot recently,\u201d the manager said. \u201cPeople are starting to get interested again.\u201d<\/p>\n
This year the sector jumped 30%, as the chart below shows, with some managers getting back into the market. For example, the Lazard\u00a0 Emerging Markets fund went overweight China for the first time in almost 30 years<\/a>.<\/p>\n Performance of sector over 1yr Killik\u2019s interest in emerging markets is also informed by macro positioning, as a weak dollar is going to be positive for emerging markets generally. While not the sole driver of allocations, currency shifts are one of several tailwinds.<\/p>\n \u00a0<\/p>\n Diversification opportunities<\/p>\n Beyond macroeconomic factors, Makin emphasised the need for more deliberate portfolio construction in a market still dominated by US equities and where investors don\u2019t realise how concentrated their portfolios are in stocks such as the Magnificent Seven.<\/p>\n While US equities have dominated returns in recent years, the manager said this isn\u2019t necessarily going to be enough anymore.<\/p>\n Killik has been underweight the US for a while (for example by cutting its allocation to Fundsmith Equity, as he recently told Trustnet<\/a>). It has been \u201ca very painful decision for a long time, but one that has paid off a bit now\u201d and has allowed Makin to build a more granular geographical approach.<\/p>\n \u201cHistorically, a lot of portfolios \u2013 even in the wealth space \u2013 just had a global allocation, with a bit of emerging markets and a bit of UK. What we\u2019re doing now is being much more transparent about our geographical splits, with separate allocations to emerging markets, Asia Pacific and Japan, because valuations will move around a lot.\u201d<\/p>\n Europe, Asia Pacific and emerging markets are all showing signs of relative strength in 2025. \u201cEurope\u2019s having a very good year to date. Asia Pacific as well. Emerging markets too \u2013 for the first time in a while, there are some really strong tailwinds.\u201d<\/p>\n \u00a0<\/p>\n Portfolio construction and fund selection<\/p>\n The core of Killik\u2019s portfolios remains anchored in low-cost exposure but the team will allocate to more expensive structures if the benefits are clear. That is the case with Fidelity China Special Situations<\/a>.<\/p>\n \u201cIt\u2019s a more expensive fund but it has unlisted exposure and gearing to justify that. Over short periods those things can lead to sell-offs or difficult markets but, over the long term, gearing and unlisted exposure will usually add value when markets go up,\u201d he said.<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/07\/20250729_killik_ma.png\")
Source: FE Analytics<\/p>\n