Mr. Toews: We create equity products that are, in our opinion, more suitable for the average investor than a typical long-only mutual fund or ETF. Our specific focus is on providing access to equity markets with dramatically reduced risk of peak-to-trough losses. We've been managing with this approach for the past 14 years and have successfully reduced losses during crisis markets. Our Hedged Emerging Markets Fund has those same objectives. Most advisers use the fund to make an allocation to Emerging Markets stocks with lower risk.
TWST: What is the case for investing in emerging markets at this time?
Mr. Toews: Demographic and endowment challenges in Europe, the U.S. and Japan will produce a strong economic headwind for decades. The number of people in developed nations in their primary working, saving, and consuming years are decreasing and will continue to decrease until 2050. The opposite is true in countries like China and India, where massive numbers of workers, savers and consumers are entering the economy. Many EM (emerging market) countries look like the U.S. did at the beginning of the industrial era. As a consequence, GDP growth in EM countries will trounce developed nations' growth. Other factors, such as company debt and return on equity ratios, also argue in favor of emerging market stocks.
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