There was an interesting talk on identifying opportunities within emerging markets at SALT today, with an all-star panel of speakers from a host of emerging markets funds. The big focus (again) was on the global sociopolitical climate, highlighting once more the growing interconnection of the markets.  A lot of the concern relates to what kinds of emerging markets are susceptible to the European deleveraging process – a tricky point of evaluation for sure.

We’ve written in the past about how difficult effectively executing on emerging market strategies can be, but most will agree that some kind of international exposure in your portfolio is important. The question we hear from investors relates to how global exposure works in the managed futures space.

In many ways, CTAs achieve global exposure by participation in liquid markets around the world, but there are CTAs that use market selection to explicitly and strategically garner some forms of international exposure. The most common form is likely international bond positions – where we CTAs trade everything from New Zealand Bank Bills to Euro Bunds; followed closely by currency futures in markets as common as the Japanese Yen and as far flung as the Norwegian Krone, and finally by regionally important commodities such as Coffee = Latin America, Cocoa = Cote D’Ivoire, Palm Oil = Indonesia/Malaysia, and so on.

Emerging market hedge funds are not our specialty, by a long shot, and we will say this – we’re glad we’re not making the decisions they have to.