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Emerging Markets Optimiser - offers exposure to 23 countries
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Current issue available to 14 September 2011
With demand for investing in emerging markets as strong as ever, Barclays Wealth is celebrating the three year anniversary of its Emerging Markets Optimiser (EMO) strategy which has performed strongly when compared to the underlying iShares MSCI Emerging Markets Index Fund (to which it is linked) throughout this period. The first tranche of the Optimiser product was launched in April 2008, and has been on offer periodically ever since, with the current issue available to intermediaries and their clients until 14 September 2011.
EMO offers investors diversified exposure to 23 countries with an innovative volatility control or ‘Optimiser' mechanism which aims to optimise performance and smooth returns, with the added benefit that investors' capital is returned in full at maturity regardless of the performance of the emerging markets, subject to the credit risk of Barclays Bank plc. The Optimiser mechanism itself is straightforward - historical equity market trends show that volatility tends to be higher when markets are falling and lower when they are rising. The Optimiser aims to exploit this behaviour by increasing exposure when volatility is low and decreasing it when volatility is high, which gives the potential for outperformance in both rising and falling markets. It is important to note that as with all investment offerings, there is still an element of risk associated with this product, and it is possible that returns produced may be less than that of unadjusted investments in the same market, should the strategy not achieve its aim.
The first Optimiser launch has returned 8.77% since inception to 24th May 2011, which compares favourably to both its peers and the underlying iShares Emerging Markets Index Fund (which returned 0.45% over the period). This illustrates the ability of EMO to adapt to market conditions, particularly the emerging market sell-off in 2008 which at the time saw a draw-down of close to 60% in the underlying Fund, but only half that amount at just over 31% for the Optimiser.
Richard Henry, Director, Investor Solutions, Barclays Wealth comments: "The Emerging Market Optimiser now has three strong years of past performance to point to, and has proved its worth in both rising and falling markets. While back-testing is a valuable tool, I do feel that real-world performance adds an extra level of comfort for advisers. It's certainly a popular product, and I believe this is precisely because it permits Emerging Market investment while managing the inherent volatility in the sector. In many cases this is a combination which resonates with investors, particularly those who have been affected by previous EM sell-offs."
Henk Potts, Equity Strategist, Barclays Wealth comments: "There are several reasons why strong emerging market performance looks here to stay. Firstly there's a recognition that emerging economies are becoming more shock-absorbent as government and central bank policy evolves, but beyond we have both the normalising of valuations close to developed market levels and potentially receding inflation as credit controls are introduced to guard against overdevelopment of property and other assets. For these reasons it is likely that emerging market investment will be a key sector for investors for some time to come."
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