It has been a much more difficult time for emerging markets, although a decent rebound since the lows of June means the MSCI EM index is only down 1.93 per cent so far this year.
Performance of indices in 2013
Source: FE Analytics
Opinion is split over which is a better play at the moment: developed markets with their superior fundamentals, or emerging markets with their inferior valuations.
Ben Gutteridge (pictured), divisional director at discretionary manager Brewin Dolphin, believes it is possible to find opportunities in both emerging and developed markets.
While developed equities have had a stellar run, he thinks certain regions and investment sectors are still attractively valued. Here he outlines the funds he is tipping at the moment.
North America
"We believe the US economic recovery, driven by an improving housing market and manufacturing resurgence, continues to gain momentum and we would urge fund buyers to look for strategies that have a value bias," he explained.
"US funds with a meaningful exposure to the industrial and banking sectors, such as the Old Mutual US Dividend fund and the JPM American Investment Trust, are two such examples."
"Although the potential withdrawal of US monetary stimulus is generating market uncertainty, when markets recognise the Fed is still a long way from raising interest rates, value funds should start to outperform."
The $273m Old Mutual US Dividend fund is listed in Ireland, but is available to UK investors for a minimum investment of $1,000.
As Gutteridge states, it has a value bias and takes the Russell 1000 Value index as its benchmark. The fund has fallen short of the S&P 500 and Russell 1000 indices over the last five years, which is not surprising given that value has been out of favour of late; however, it has also fallen short of its benchmark over the period.
The fund has 21 per cent in financials and includes Bank of America as its number-one holding. Basic materials and industrials have a combined weighting of 33 per cent.
Old Mutual US Dividend has ongoing charges of 1.7 per cent. It is run by the trio of Ray Nixon, Brian Quinn and Lewis Ropp, who took charge of it earlier this year.
The JPM American IT takes the S&P 500 as its benchmark, but as Gutteridge points out, it has a significant weighting to value areas such as banks and industrials. It also has a significant portion in tech, telecoms and media, at 22 per cent.
Performance of funds vs indices over 5yrs
Source: FE Analytics
The trust, which is headed up by Garrett Fish, has significantly outperformed its benchmark over five and 10 years, but its value bias has seen it lag slightly over one and three.
It has ongoing charges of 0.7 per cent and is currently trading on a discount of 0.4 per cent.
Emerging markets
"A slowing China coupled with a stronger US dollar creates a challenging outlook for commodity prices – this backdrop also bodes poorly for emerging market stocks, which still derive much of their earnings from commodity-related activity," said Gutteridge.
However, Gutteridge thinks emerging markets remain a good value play for long-term investors. He points out that investors have to look further afield to find a fund in this area, as many of the best-known options are soft-closed.
"Although Aberdeen and First State funds have managed to navigate this more difficult period, structural initial charges mean that we are recommending Fidelity Emerging Markets for any additional exposure," he explained.
"Managed by Nick Price, this fund will focus on consumption, which despite being a more favoured part of the market, is still underpinned by better fundamentals such as low unemployment and wage growth."
Performance of funds vs sector and index since July 2009
Source: FE Analytics
The fund has returned 51.32 per cent since Price took over, beating its MSCI EM benchmark in the process. However, as the graph above shows, it has failed to keep up with its top-performing Aberdeen and First State rivals over the period.
Europe
"Based on recent fund flows, it appears the modest improvement in manufacturing and employment data in Europe is starting to capture the imagination of the investment community," said Gutteridge.
"Provided the political landscape does not erupt, and austerity measures continue to ease, we suspect the trend can continue."
If this is indeed the road map for the eurozone, Gutteridge thinks investors should consider the Neptune European Opportunities fund, managed by Rob Burnett.
"This strategy is heavily exposed to the financial and industrial sectors: areas of the market that are most sensitive to better economic news-flow," he said.
"It is also significantly underweight the more defensive areas, such as healthcare."
Performance of fund vs sector and index since May 2005
Source: FE Analytics
The fund has significantly beaten its sector and benchmark since Burnett took it over in May 2005, though its value bias has seen it underperform over one and three years.
While Gutteridge sees the value in investing in Europe, he believes that the prevalent headwinds for the region mean investors should err on the side of caution.
"It is a tall order to believe Europe’s efforts amidst this nascent recovery cannot be undone by policy error – the increasingly fragile political outlook, therefore, should limit investor exposure to this fund," he added.
Neptune European Opportunities requires a minimum investment of £1,000 and has ongoing charges of 1.82 per cent.
Japan
"Japan also continues to enjoy much of the investment spoils, particularly hedged share classes," said Gutteridge.
"This strategy supports the theme that a weakening yen can drive corporate earnings higher through improving global competitiveness."
"Our preferred pick in the region is Schroder Tokyo, managed by Andrew Rose. Andrew is an experienced manager with a good team around him. This is a core fund but it has a value bias, meaning there is a moderate overweight to the more economically sensitive areas of the market such as technology and industrials."
"The fund could benefit, therefore, from any data confirming Japan is getting closer to achieving its economic objectives – namely inflation. The fund also offers hedged share classes to add even more conviction to the trade," he added.
The £1.1bn Schroder Tokyo fund has beaten its IMA Japan sector average and TOPIX benchmark over three, five and 10 years, but has fallen slightly short over one.
It requires a minimum investment of £1,000 and has ongoing charges of 1.67 per cent.