abrdn will relaunch the abrdn SICAV I-Emerging Markets Sustainable Equity Fund under the new name abrdn SICAV I-Emerging Markets Ex China Equity Fund. According to the asset manager, the fund introduces a series of changes for investors seeking to explore more opportunities in emerging markets. abrdn clarifies that the fund is available in Spain and the U.S.
Firstly, the decision to exclude China, as explained by abrdn, is in response to demand from a group of investors seeking active options to manage their exposure to the country. While abrdn continues to offer a wide range of strategies that include China, the firm is responding to client demand for diversifying their options.
Across the industry, the number of firms managing emerging market strategies excluding China has grown from three in 2017 to nearly 50 in 2024, according to Morningstar. abrdn has been managing an emerging markets strategy excluding China since March 2022 for the U.S. market. The change also comes at a time when, according to abrdn, opportunities in emerging markets are increasing, as they are expected to account for nearly 50% of global growth by 2050, according to abrdn’s Global Macro study.
They also note that the managers of the relaunched fund will be the Emerging Markets ex China portfolio construction team based in London and Singapore: Nick Robinson and Devan Kaloo in London, and Xin Yao NG in Singapore, supported by a broader global emerging markets equity team based in five locations outside China, from São Paulo to Singapore.
“China is home to some fantastic companies and is poised to surpass the U.S. as the world’s largest economy around 2035, so this is not a rejection of the Chinese market. However, we recognize that some investors want more flexibility in their approach to China. Ultimately, it’s about choice while embracing some of the key megatrends that we believe will drive emerging markets in the future. We see four powerful themes affecting the ex-China universe: consumption, technology, the green transition, and relocation. The fund invests in many companies that will benefit from these themes. The non-Chinese universe also offers sectoral diversification, as it includes more information technology and financial companies at the index level than the standard emerging markets index. The team believes that the strength of the tech sector will continue to expand beyond the U.S. market and holds a significant active position in companies benefiting from AI investments,” said Nick Robinson, Deputy Head of Global Emerging Markets Equities at abrdn.
The fund will remain classified as Article 8 under the SFDR and will continue to follow the NBIM exclusion list. The benchmark index will switch to the MSCI Emerging Markets ex China 10/40 Index (USD). These changes will not alter the fund’s risk profile. The fund will follow abrdn’s “emerging markets ex-China equity investment approach that promotes ESG aspects.”
By applying this approach, the fund commits to holding a minimum of 10% in sustainable investments, a reduction from the current 20% commitment to sustainable investments. At the index level, the MSCI EM includes 1,328 companies, while the MSCI EM ex China includes only 673. The fund will continue to use a qualitative identification process and avoid investing in companies lagging in ESG performance, incorporating negative screening based on the UN Global Compact, Norges Bank Investment Management (NBIM), controversial weapons, tobacco production, and thermal coal. The fund will also maintain explicit ESG objectives as outlined in its new investment objective and policy.
