The newly anointed chief investment officer at Oppenheimer, Art Steinmetz, is a noted bull on the emerging markets. His promotion gives the firm a chance to follow suit. Steinmetz, formerly the head of Oppenheimer's fixed income funds, has systematically overweighted emerging markets debt for years -- in the local currency, when possible -- because places like Indonesia and Brazil are where you find the yields.
As he tells reporters, there is too much fear out there in the markets right now, which makes the yield situation even worse. Too much risk aversion pushes too much money into Treasury bills, and that in turn drives AAA yields practically to zero. But for investors, there is no real reward without risk, so Steinmetz traditionally looks for markets that are unfairly discounted due to market preconceptions or labels like "developed" and "emerging."
As he put it a few months ago, "the monikers are starting to not matter because the emerging economies really are the engines of the world right now." Meanwhile, problems in Europe, Japan and North America are blowing out, reducing the premium that these "no-risk" markets once enjoyed.
He still likes Brazil, Mexico, South Africa and Turkey for their ability to raise interest rates as necessary to restrain long-term inflation. On the currency side, Steinmetz expects more weakness ahead for the dollar, which should help everything denominated in local currencies -- as well as commodities -- outperform as far as U.S. investors are concerned. As far as stocks go, Oppenheimer's flagship fund in this space, Developing Markets ODMAX, is head and shoulders above most of its peers in terms of performance.
The fund is highly invested in blue chip names that we cover a lot at EmergingMoney.com: companies like Infosys INFY, America Movil AMX and of course Petrobras PBR.