"There are clearly higher risks with emerging markets investing, however, in my opinion, many of these are priced in to today’s valuations," Yearsley said.
"If you want to beat cash and achieve higher returns, then historically equities are the game and long-term is the name."
Our data shows that over the last three years, emerging markets have underperformed developed markets.
According to FE Analytics, the FTSE All Share and the S&P 500 have both returned more than 30 per cent while the MSCI Emerging Markets index has lost money.
Performance of indices over 3yrs
Source: FE Analytics
Yearsley says it is surprising as economic growth rates in many developing countries are much better than in the UK or US and there are far fewer demographic problems. For this reason, he thinks the tide could soon change.
"The improvement in fiscal conditions has been paramount, for example many emerging nations used to be heavily laden with debt; now they have lower burdens than many developed countries," he said.
"Eighty-five per cent of the world’s population lives in emerging nations and 63 per cent of global foreign exchange reserves are held by these same countries."
"This increase in wealth is enabling hundreds of millions of people to become consumers for the first time."
"It is hard to put a finger on why [they have underperformed]. The simple reason could be down to the risk appetite of investors."
Rowan Dartington’s Tim Cockerill pinpoints China as a particularly attractive proposition at the moment, and suggests that investors should return to the country.
Cockerill points to encouraging recent data and long-term socio-economic factors which, combined with cheap valuations, make for a good story.
He says China currently benefits from certain fundamentals that give it the edge over other emerging markets.
Cockerill points to a large and young population with a growing middle class, strong economy and a society which is opening up despite not being the same politically as the West.
In that respect, his views are similar to those of Yearsley.
"All those factors say this growth we are seeing will continue. What would concern me would be if there was a marked shift away from that, but I do not see that happening," Cockerill added.
Cockerill backs First State Global Emerging Markets Select rather than a pure China fund for exposure to the region. Unfortunately, this product requires a steep minimum investment and is therefore more suited to institutional investors.
Rowan Dartington has decreased its emerging markets position in certain portfolios in recent months, but remains overweight in high-risk strategies due to the expected positive performance in the long-term.
"We pulled back exposure when it became apparent that things were slowing down, but we went from an overweight position to a lesser overweight position against our benchmark,” Cockerill said.
"The benchmark weighting in emerging markets is 3 per cent and we're 4.5 per cent. We are 50 per cent overweight, but in the scheme of things, balancing the type of fund we've got, looking at the portfolio as a whole, I am quite happy with that exposure."
He says this approach will work for investors looking at a three-year view, rather than a three- to six-month timeframe.
Yearsley supports the belief that emerging markets are a good long-term prospect and points to the views of James Donald, manager of the Lazard Emerging Markets fund.
He says that it is encouraging that Donald is optimistic about emerging markets, and like the manager agrees that underlying fundamentals, such as sales numbers, are fine.
"The recent short-term pessimism has enabled Donald to buy into companies and areas he has previously avoided, for example the Chinese weighting within the fund has risen from 3 per cent to almost 12 per cent as valuations have fallen so far he can finally buy into good companies at cheap prices," he said.
Our data shows that the £461m Lazard Emerging Markets fund has been the third best-performing portfolio in the IMA Global Emerging Markets sector over 10 years, with returns of 286.47 per cent, beating its MSCI Emerging Markets benchmark by more than 60 percentage points.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund also sits in the top quartile over three and years. It requires a minimum investment of £1,000 and has ongoing charges of 1.6 per cent.
