Tap into emerging market consumers with Fidelity

The Fidelity Emerging Market Fund (ISIN: GB00B4NTG252) is a quality play that will give you some extra defence in this market fraught with risk. If you're an investor looking to get exposure to the structural rise of the emerging middle class consumer, this could be the fund for you as it's has a large exposure to this area. As well as investing heavily in consumer companies, it's much lighter than its peers on many of the commodity companies plagued by state interference and struggling with a slowing China.

The fund has outperformed the benchmark over one year with a 12.53 per cent performance (compared with just 7.58 per cent from the MSCI EM Net Return in Local Currency index). But over three years it slightly underperformed the index, producing a 10.19 per cent return.

Among its core holdings are consumer stocks like Naspers, Samsung Electronics and Baidu. It's mainly invested in Asia, but potential investors should be aware it also has a chunky 19.56 per cent allocation in Africa - a frontier market that gives a real risk injection and extra volatility to the fund.

But the managers refuse to buy stocks with a state-owned influence in emerging markets. That's why Gazprom, Petrobras and International Parlay, commonly held stocks for other many other emerging markets funds, are strictly off the menu. Why is state-ownership an issue? Because state-owned aren't focused enough on shareholder returns, they buy resources locally at over-inflated prices and they are underpinned by Chinese demand, which is diminishing. Staff wages are also bouncing up with inflation - another detraction from shareholder benefits.

The biggest threat to the fund, according to Ben Gutteridge, head of funds research at Brewin Dolphin, would be a sharp acceleration in Chinese growth, which would feed quickly into commodities and mean Fidelity's fund could underperform those funds with more resources exposure.

Mr Gutteridge also likes the consistency within the team at Fidelity. The fund's manager, Nick Price, is Fidelity's primary global emerging markets and emerging EMEA equity portfolio manager and has managed the fund since 2010. He is experienced, having joined Fidelity in January 1998 as a research analyst, before being selected as the assistant portfolio manager for Fidelity's European Growth Fund in 2004.

Mr Gutteridge also says this fund isn't too dissimilar to the popular but soft-closed First State Global Emerging Market Leaders, and could be a good alternative to it.

Brewin Dolphin takes a cautious stance on the emerging markets but still recommends the fund. It believes the recent pick-up in performance of emerging markets assets relative to developed markets is unsustainable. "Financial conditions in China remain challenging and cannot support anything other than a brief arrest in the pace at which she slows. US monetary normalisation will also create funding issues for those countries running current account deficits, such as Turkey, India, South Africa and Brazil," says Victoria Hasler, a fixed-income analyst.

With a total expense ratio (TER) of 1.85 per cent, this fund is at the upper end of what we'd call reasonable fees. But the regions it invests in are highly risky and require scrupulous research, which might warrant paying a bit extra. So, if you're looking for a long-term defensive play this could be it. Buy.

Fidelity Emerging Market Fund (ISIN: GB00B4NTG252)