01.27.2016
By Rob Daly

Ativo Capital Turns to Developed Markets for Returns

Sustained low oil prices has Ativo Capital Management avoiding investing emerging markets like Brazil and Russia in favor of the more developed economies despite market chatter of a possible recession on the horizon.

“For us, there is no sign for recession right now in the developed markets,” said Ram Gandikota, senior portfolio manager and associate director of research at Ativo Capital. “Where we are pulling back is in emerging markets affected by low oil and other commodity prices. We see the oil market as oversold. We think the oil market will remain depressed for the foreseeable future, so we will avoid those sectors.”

Ram Gadikota,Ativo Capital

Ram Gadikota,
Ativo Capital

In the meantime, the Chicago-based money manager plans to maintain its investments in emerging markets that have less exposure to the oil markets.

“We’re are investing in India and Indonesia where the consumers are supported by local commodity prices and are not as dependent on the oil market,” he explained.”The emerging markets have been the driver of global economic growth for the past 10 to 15 years, but they’ve slowed. Now the entire global economy is depending on the slower 2 to 2.5% growth in developed countries.

Ativo Capital is bullish on the European and US markets, even though their growth rates have slowed a bit.

“Not all of the indicators are negative,” noted Gandikota. “Europe has low inflation; its GDP growth is flat; and interest rates are essentially negative. Even in the US, spending is up; automobile sales are up; and the GDP growth rate is trending up.”

The firm also plan to continue its long-term investments in China since the government is making all of the right decisions in switching from its historical high GDP growth rate to a more manageable one of 6.5 or 6.7%.

“In the long term, that rate will be much more stable for them as an economy,” he added.

Related articles

  1. Emerging Markets Unfazed by Taper Talk

    Growth rate in EM electronic bond trading is running near 30%.

  2. Emerging Markets Unfazed by Taper Talk

    Partnership with Marco Polo shows growing global electronic trading volumes in fixed income.

  3. ESG Matters in Fixed Income

    The recommendations propose disclosure of material ESG specific risks.

  4. Emerging Markets Unfazed by Taper Talk
    Daily Email Feature

    MarketAxess Eyes EM Growth

    Poland and South Africa are among emerging markets with appeal.

  5. Daily Email Feature

    Tech Transformation Ahead

    Exchange execs say developing markets have the most room to run.