Pension investors have the luxury of a distant time horizon which allows them to take on more risk and look past short-term noise.
Robert Love, head of research at Asset Intelligence, has taken up positions in two specialist funds that are positioned to take advantage of multi-decade themes.
Fidelity Emerging Europe, Middle-East, and Africa (EMEA) and First State Global Listed Infrastructure have different risk profiles and strategies, but both are underpinned by long-term investment themes.
Fidelity EMEA
Love says the £121m Fidelity EMEA fund offers exposure to dynamic countries in regions often overlooked by global emerging markets funds, which tend to favour Asia and Latin America.
Fidelity's EMEA fund, which has five FE Crowns, was launched in early 2008 under Nick Price, just months before the global financial crisis.
Despite the market turbulence that unfolded in the subsequent years, it has delivered strong performance since its inception.
According to data from FE Analytics, Fidelity EMEA has made 154.67 per cent over the past five years, compared with returns of just 110.75 per cent from the MSCI EM EMEA index.
Performance of fund vs index over 5yrs
Source: FE Analytics
"The Fidelity EMEA fund taps into the vast potential that African and Middle Eastern economies hold," said Love.
"I see positive returns coming from companies in these regions as the economic recovery gains traction."
Africa's population of 1 billion is set to grow by 50 per cent over the next 20 years, the analyst says, and the continent is due to have the world's largest working population by 2035, judging by UN statistics.
It is one of the most undeveloped, resource-rich regions on the planet, with underpenetrated consumer markets and limited competition, which Love says makes it a great place to invest in.
The fund currently has almost half of its money in South Africa and Nigeria, with 38 per cent in the former and 9.2 per cent in the latter.
Deeper capital markets and more welcoming business environments – particularly in the case of South Africa – make both countries important routes in to the region, Love says.
The fund has 50.3 per cent in Africa and 40.7 per cent in emerging Europe, with the largest contributor to the latter position being the 31.9 per cent in Russia.
Ongoing charges are 1.89 per cent and the fund requires a £1,000 minimum initial investment. It is highly rated by the FE Research team and is a member of the FE Select 100.
First State Global Listed Infrastructure
Sticking with a global view, Love also favours the £814m First State Global Listed Infrastructure fund in his portfolio.
It is another one that has five FE Crowns and has won a place on the FE Select 100 list of elite funds.
The fund invests in companies involved in developing infrastructure such as utilities, transport links and storage and transportation sectors.
Data from FE Analytics shows that the fund has made 84.79 per cent over the past five years while the average IMA Global fund has made 89.25 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
"Backed by long-term trends of urbanisation and globalisation, and the proliferation of mobile communication networks, investment in infrastructure is not going to stop anytime soon," Love said.
Love points out that the infrastructure sectors held up better in the 2008 crash, underlining the point that the fund can also protect its investors' cash in bad markets.
Performance of indices 2007-2009
Source: FE Analytics
"Fund manager Peter Meany seeks companies with structural growth prospects, high barriers to entry, pricing power, and that operate in stable regulatory environments," Love said.
The fund has 39 holdings across more than 13 countries and a dozen sectors.
"The global element allows the fund to diversify over sectors and countries, mitigating risk and seeking out areas of strong growth," Love said.
The improved outlook in developed economies means potentially strong returns from the fund's most active overweight holdings in French, Australian, and British infrastructure equities, he says, with increased passenger growth supporting airport, rail, and toll road sectors in particular.
The fund has 18.6 per cent in France compared with 11.3 per cent from its benchmark. It holds 10.1 per cent in Australia, almost double the 5.6 per cent of the benchmark, and 10.4 per cent in the UK to the 6.4 per cent of the index.
Conversely, it has just 29.4 per cent in the US compared with 36.1 per cent from the benchmark.
The fund also benefits from improved earnings among Japanese infrastructure companies, which make up 10.2 per cent of total assets.
Widespread privatisation of infrastructure, already underway, for example, in debt-ridden southern Europe, will reduce the risk associated with government budget deficits, he adds.
The fund requires a minimum initial investment of £1,000 and has ongoing charges of 1.62 per cent.
