The Nedgroup Investments Global Emerging Markets Equity Fund, just a year old, has been making portfolio adjustments in light of Covid-19 and is adding to its already overweight exposure to China. Despite the slowing of China's growth, the fund remains ahead of its benchmark.

Portfolio manager Ian Beattie explains his outlook for the rest of the year, stating that “We believe that the unprecedented fiscal and monetary stimulus should drive a strong recovery starting in H2 2020. Equity markets will likely discount return to growth as new COVID-19 infections peak”.

Mr Beattie runs the Nedgroup Investments fund through his firm NS Partners, as Nedgroup uses a multi-manager approach.

The current portfolio strategy is based on the belief within the team that the policy action by the monetary authorities will be sufficient to tide the global economy over until the virus is suppressed sufficiently to allow a normalisation of people’s lives.

The fund is bullish on China, due in part to what the firm describes as its “initially draconian” response to the pandemic and its relatively quick emergence from the crisis. It cites several factors for this sentiment, including factories being back up and running, restaurants opening, and China’s outperformance of the MSCI EM benchmark which has been nearing 20 percent since March, in contrast to other EM countries such as Brazil, underperforming by roughly 40 percent, and India and Russia, underperforming by roughly 20 percent. However the fund is now also looking to allocate more to cyclical markets which underperformed at the start of the crisis.

The fund remains overweight in IT, internet, consumer discretionary and staples and underweight in materials, telecom, autos and energy but looks to add to this second group with high quality stocks as recoveries begin. The leverage style factor remains negative, meaning that the portfolio companies have less debt than the index as a whole.