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Over the past five years, US equities have shown superior performance. Measured over the five years ending May 2022, the S&P 500 index achieved an annualised total return of 13.9% in euros, compared with 10.8% for the MSCI World index. The return of the MSCI Europe index compares favourably with 5.1%. Only in 2017 did US equities perform less well, but in the years thereafter it was America First.

Chinese bonds have defied the general negative trend in bond and credit markets this year until recently, but ended May with heavy losses. 

Amid lingering fears of stagflation and a possible recession, investors are hard pressed to find opportunities in today’s markets, if any. Market experts at JP Morgan Asset Management believe that those willing to look at fundamental factors underpinning equities, also in Europe, can find ways to enrich their portfolios with some specific quality growth stocks if they know where to look.

Emerging countries often appeal to investors’ imagination. Fast-growing economies, demographic attractiveness and a wide variety of investment opportunities make them attractive. In this week’s Top 5, we look at the best equity funds for emerging Europe.

The vibrant economies of South-East Asia are prominently on investors’ radar, partly due to China’s spectacular economic rise, which has given the entire region a major economic boost. As a result, the emerging countries that lie less far to the east, the Central and Eastern European region, have been forgotten.

Investment funds that invest in health and wellness already existed, but DNCA Finance is now launching a thematic equity fund that invests in the sports sector. DNCA managers Boris Radondy and Simon de Franssu spoke to Investment Officer Belgium. “There are 340 listed companies in the world whose activities are closely related to sport. They represent a market capitalisation of $3,000 billion, which has increased sixfold in the last decade.”’

Has growth in new registrations of Reserved Alternative Investment Funds, known as Raifs, in Luxembourg peaked? As Investment Officer readers have noted, growth tailed off in February and March. Marc Kriegsmann, Raif market specialist at leading Luxembourg Raif issuer Hauck & Aufhäuser, said the dynamic in the Raif market may be affected by increasingly stringent risk control processes and the presence of suitable alternatives. 

Investing in weapons and the military industry is controversial for many investors. For example, since 2011, investing in companies that produce, sell or distribute cluster munitions or crucial components thereof has been prohibited by law in 110 countries, including the Benelux. 

It is important to note however that the legal prohibition does not apply to participation in investment institutions and indices in which the producers of cluster munitions or companies involved represent less than 5 percent of the value of that investment institution or index.

As expected, 2022 looks set to be a turbulent year for fixed income assets. High-yield bonds shared in the blows dealt in the first quarter. 

The asset class is caught in a general bear market for bonds.  The GBI-EM Global Diversified Index, the leading benchmark for emerging market bonds, continued its downward trend and closed the first quarter of 2022 with a loss of 4.4 percent measured in euros.  In this difficult market, it is Man GLG that has been the best performer this year. 

For emerging countries, the first quarter of 2022 was dominated by the war in Ukraine unleashed by Russia. Equities from Russia itself suffered particularly badly. Various index compilers, including MSCI, have removed Russian shares from all their regional indices. At a price of 0, the MSCI Russia index has suffered a loss of 100 percent this year.