However, Lazard’s James Donald relishes finding unloved and undervalued stocks, hunting for companies that have the potential to turn their fortunes around.
His method has clearly paid off. The manager has consistently outperformed his peers over three, five and 10 years, and has performed in line with them over the last 12 months while emerging markets have taken a beating.
Over the last decade, Donald has returned 338.74 per cent, over 100 percentage points more than the peer group average of 235.1 per cent. The manager has also held up better in the extreme short-term, losing less than other managers over one, three and six months.
"We just follow our process," he said. "It’s based on valuing companies depending on valuation and profitability. We want to maximise the investment opportunities that have the most potential profitability."
The manager says his value style means he often stands against the majority of the market, but he is OK with that.
"I don’t have a problem being weighted far away from the benchmark," Donald added.
"It’s the only way in the world of active management. You just need enough opportunities that can turn themselves around."
The manager has recently increased his exposure to China to 11 per cent, in spite of the many predictions of an economic slowdown in the country. Donald says that from 2007 to 2011, he held no more than 3 per cent of his portfolio in the leading Asian economy, while the benchmark was roughly 16 to 19 per cent.
He has also boosted his exposure to Russia to 7 per cent of the fund. The country has recently overtaken Germany as one of the top-five largest economies in the world, reflecting its strong growth of late.
However, the manager admits governance is a key issue in emerging markets, and is part of his process when it comes to analysing companies.
"Russian governance is almost by definition terrible," he said. "But there are exceptions."
He adds that governance is not just an emerging markets worry – it can also plague companies in developed markets, such as US-based copper and gold producer Freeport McMoRan, which has faced a slew of negative publicity over its controversial Grasberg mine in New Guinea.
Donald says he takes a pure bottom-up approach to selecting companies to add to his four crown-rated, £406.9m Lazard Emerging Markets portfolio, preferring to dig into a firm’s fundamentals rather than worry about the overarching macro environment.
"I’m attracted often to companies with low valuations, which are often contrarian because people aren’t jumping into them," he said.
The fund has performed well on the back of this approach, returning 340.69 per cent over 10 years compared with 264.25 per cent from the MSCI Emerging Markets index and 253.02 per cent from the IMA Global Emerging Markets sector.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund is yielding 2.1 per cent.
Lazard Emerging Markets requires a minimum investment of £2,000 and has ongoing charges of 1.57 per cent.
The two highest sector weightings in the portfolio are to telecommunications, media and technology stocks, and financials.
Among the portfolio’s top holdings are major Russian bank Sberbank, China Construction Bank and Shinhan Financial Group. Banco do Brasil, one of the largest banks in Brazil, also features in the top bets.
Donald says he is looking at opportunities in South America's miners and that he already holds Brazilian iron ore mining firm Vale and Group Mexico, the largest mining corporation in Mexico.
From a macro perspective, Donald says he did not foresee the underperformance of emerging markets this year.
However, he says this seismic shift will be short-lived since corporates in many emerging market countries have massive potential for growth.
Still, emerging markets have sharply underperformed their developed counterparts so far this year, sustaining losses of 2.6 per cent, primarily from the 17.23 per cent fall in the correction in June.
By comparison the FTSE All Share is up 14.77 per cent and the S&P 500 is even further ahead, picking up 26.17 per cent so far in 2013.
Year-to-date performance of indices
Source: FE Analytics
However, true to his value nature, Donald says this only indicates why it is time to invest in emerging markets.