Austin Forey, one of JPMorgan Asset Management’s most senior emerging market fund managers, describes his recent performance as “disappointing”.

He heads up some of the most established funds of their type, including the Luxembourg-based £3.1bn JPM Emerging Markets Equity fund, which he has run since launch in April 1994.

He manages the UK-based JPM Emerging Markets fund too, which also launched in 1994 and which he took over in July 1997.

On that fund, he has mustered gains of 41.1 per cent in the period since the catastrophic failure of Lehman Brothers in September 2008, compared with a 52.1 per cent gain on its benchmark MSCI Emerging Markets index in sterling terms.

In the past year the picture is similar. The UK-based fund has lost 3.5 per cent, compared with a 0.9 per cent loss on the index.

Mr Forey says his poor showing reflects his focus on India, which ranks as one of the worst-performing emerging markets in the past year in sterling terms, after the rupee devalued sharply.

India has suffered a sharp drop in its economic growth rate in recent years, from 9 per cent in 2011 to 4.4 per cent over the past financial year.

This decline in economic growth has been exacerbated by high government indebtedness and high inflation of roughly 10 per cent, worsening the rupee devaluation.

JPM Emerging Markets fund

Other problems Mr Forey cites is his holdings in falling South African stocks and a failure to own consumer discretionary stocks that have rebounded of late, such as Tencent, the Chinese internet company, and Naspers, the South African media group.

He says July and August were particularly tough months for the fund, as the Indian positions took their toll.

In response the manager is standing his ground. He says he still has “a lot” in India and South Africa, and has not made many changes recently. He is currently looking to buy in industrials.

In 2014 Mr Forey believes a significant driver of emerging market performance will be the US Federal Reserve reducing the size of its bond-buying programme, which he says will primarily affect currencies of emerging markets.

Mr Forey says those countries that are reliant on foreign capital to fund their own deficits, such as Turkey, will struggle when the US tapers the programme, while those with a budget surplus or high cash reserves, such as Taiwan, will not.

Some have suggested emerging markets could see a repeat of the crisis of the 1990s next year, but Mr Forey dismisses these claims, though he admits tapering will provide a “headwind” to returns.

On the positive side, the manager tips profit growth from emerging market companies – an area in which they have struggled compared with their developed-market peers in recent years.

He says the main drivers of these struggles have mostly played out and he is now “reasonably optimistic about profit growth from emerging market companies”.

Mr Forey is not the only one to suffer underperformance thanks to holdings in India. Many fund managers who focus on stock picking, have suffered a similar fate.

This includes giants of the Asia-Pacific sector such as the First State Asia Pacific Leaders fund and the Aberdeen Asia Pacific fund. Both are among the best in the sector in the long run, but have dropped to the bottom quartile in the past year.

Matthew Jeynes is senior reporter at Investment Adviser

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