Invest where growth will continue via Newton Global Emerging Markets

However, this shouldn't detract from the long-term drivers of emerging markets growth, and not all emerging economies would be equally affected. What's more, valuations of emerging economies are typically much more attractive than those of developed markets, so long-term growth investors should still include exposure to emerging markets in their portfolios.

Sam Lees, head of research at FundExpert.co.uk, suggests investors focus on long-term growth themes such as countries with young populations, lower debt and regimes focused on reforms aimed at unlocking the potential of their domestic economies. And a good way to get exposure to these is through IC Top 100 Fund Newton Global Emerging Markets (GB00BVRZK937).

This fund is among the 10 best performers over three and five years out of more than 60 in the Investment Association (IA) Global Emerging Markets sector, and beats its benchmark, MSCI Emerging Markets index, over those periods. It aims to outperform MSCI Emerging Markets Index by more than 2 per cent a year over a rolling five-year period.

Newton Global Emerging Markets' manager, Rob Marshall-Lee, takes high-conviction bets switching between areas he thinks will outperform. Although this makes the fund high-risk, the long-term returns have justified the approach.

Mr Marshall-Lee and his team follow a thematic investment approach, which defines the areas from which they pick stocks, although sector weights result from active stockpicking. The team conducts extensive proprietary research and consensus must be reached before a stock is included. They also analyse a risk/reward profile for each holding.

The fund has nearly a third of its assets in consumer discretionary companies, so taps into the growth of middle classes in emerging economies.

"This growth-style fund has a pronounced quality bias which should help in challenging markets," say analysts at Tilney Bestinvest. "We believe the manager is capable of adding value over the investment cycle, providing investors with robust risk-adjusted returns."

It is also relatively small at about £91m, so can move in and out of investments more easily than some larger funds.

However, Newton Global Emerging Markets hasn't performed well over one year. This is partly due to its high exposure to India, where markets have experienced volatility due to the recent withdrawal of 500 and 1,000 rupee notes. India's long-term drivers, however, such as its young population, low debt and reform-minded government remain in place.

"India is attractive because it is relatively insulated from the negative effects that we could see from Trump's antitrade policies due to good foreign exchange reserves and largely domestically held debt," says Mr Lees. "The country is in a much better position to deal with global volatility, possibly triggered by US rate rises - foreign exchange reserves are close to all-time highs, making the country less dependent on hot money from overseas."

The upside potential of other emerging markets remains in place too, and they offer access to trends that are not significant in developed economies.

Mr Lees adds that investors should be wary of funds that have bounced particularly strongly recently, for example those with heavy Brazil weightings, as that performance may not be sustainable over the long term. He thinks that periods of weakness are an opportunity to accumulate for those with a long-term view. So if you are investing for long-term growth and can ride out short periods of volatility, then Newton Global Emerging Markets looks like a good way to tap into the emerging market themes that should continue to grow. Buy.

Source: Morningstar, *Newton

Performance

Source: Morningstar as at 25 November 2016

Top 10 holdings as at 31 October 2016 (%)

Geographic breakdown (%)