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Ketterer on a Safer Way to Tap Emerging Markets

Sarah Ketterer, co-manager of Causeway International Value, on how to sidestep the political risk of developing countries.

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Gregg Wolper: I am curious also about emerging markets in general. Last year, they were one of the worst performers, China in particular, India, had terrible years in 2008. They have rebounded very strongly. In Causeway International Value, you don't have that large of an emerging-markets stake, but I know you must think about them when making your picks. Could you talk about why you have a fairly low emerging-markets stake and how it enters into your thought pattern for the other stocks that you have?

Sarah Ketterer: Yes, we are a value manager, and we think that to find value, you need to be in economies that have very little political risk. So the developed market, when there are 24 markets for us to choose from for the international fund, and they are all, we consider, to be developed: All of the major European countries and Japan, Canada. Emerging markets, on the other hand, are bought for growth. Many of the companies we invest in in the developed world, like Telefonica in Spain or Vodafone in the U.K., to name just two great world-class telco companies, are driving the significant part of their growth from the emerging countries. So we can get access to that engine of growth without having to take that type of political risk.

Gregg Wolper does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.