Focus on strong companies with Fidelity Emerging Markets

For these reasons exposure to China may not seem the most attractive option at the moment. However, for many investors maintaining a balanced portfolio is important, and this includes having exposure to emerging markets. A good way to tap into longer-term growth and companies that can withstand short-term fluctuations is via Fidelity Emerging Markets Fund (GB00B9SMK778).

"Given the problems associated with a Chinese slowdown, we would recommend investors remain unmoved by the opportunity to bottom fish within emerging markets at this stage," says Ben Gutteridge, head of fund research at wealth manager Brewin Dolphin. "For those looking to retain some exposure, however, we would suggest Fidelity Emerging Markets. This fund invests primarily in the higher-quality companies that are enjoying secular growth drivers, such as consumption. The fund avoids more cyclical industries such as commodity plays, which are more geared into Chinese economic recovery."

Consumer discretionary shares account for nearly a third of the fund, and staples account for 8 per cent - a reason why we first tipped it as a 'buy' in 2013. It has no holdings in energy with materials only accounting for 2 per cent of assets.

The fund is among the top 10 best-performing funds in the Investment Association (IA) Global Emerging Markets sector over one, three and five years. It also beat its benchmark, the MSCI Emerging Markets index, over one and three years, although it failed to beat it over five years.

The fund's manager, Nick Price, seeks high-quality, attractively priced companies capable of delivering sustainable returns. He prefers those with strong market positions and competitive advantages, as these are typically able to deliver attractive earnings throughout the economic cycle. He also favours companies that deliver superior returns on their assets and have well capitalised balance sheets, as they are usually more capable of funding internal growth without diluting existing shareholder earnings by issuing new shares.

The fund has a reasonable ongoing charge of 1.07 per cent and is available on platforms including Alliance Trust Savings, Fidelity Personal Investing and Hargreaves Lansdown, although you have to pay platform fees on top of this.

The fund's managers also have an affinity for companies that pay a dividend although the income is moderate, meaning the fund yields less than 1 per cent.

Fidelity Emerging Markets has a quarter of its assets in China, in line with its benchmark, and even though it is focused on stronger companies if markets are going down their share prices could come down too - despite the underlying companies trading well.

But the fund also invests in other promising areas so if you have a long-term investment horizon, can ride out some volatility along the way and want to maintain exposure to China and emerging markets, then investing in strong companies that can ride out a difficult period seems like a good way to do it. So Fidelity Emerging Markets remains worth consideration. Buy.

Source: Morningstar & *Fidelity

Performance

Source: Morningstar, as at 6 July 2015

Top 10 holdings, as at 31 May 2015 (%)

Geographic breakdown (%)