Accessing emerging market themes via MSCI World stocks is a “blunt instrument”, which is unjustified given improvements in the developing world’s corporate governance and sovereign risk, according to Martin Currie chief executive Willie Watt.

The Edinburgh-based manager is only just bedding down a global emerging markets capability, which Watt admitted some investors were surprised to hear, given the firm’s well-known Chinese, Japanese, Asia ex-Japan and global equity teams.

Martin Currie poached a six-person team from its neighbour, Scottish Widows Investment Partnership, in May and the last three members are due to start later this month.

Watt said the team, lead by Kim Catechis, had been encouraged to become “more aggressive” in implementing its fundamental research-driven approach, which had generally mirrored the MSCI Emerging Markets Index in its 10-year history under Catechis.

The persistence of the theory that emerging market dynamics could be accessed through developed market stocks surprised Watt.

He admitted that some emerging markets currently appeared expensive next to some developed markets, and that the lack of structural buyers for the latter made the Chinese and Indian bourses subject to supply-constrained bubbles.

“That’s why you really don’t want to be buying an emerging markets ETF [exchange-traded fund] at the moment,” Watt said.

He said that Martin Currie’s China equity fund under Chris Ruffle, which now accounts for 28 per cent of the firm’s total assets under management, was biased toward smaller ‘A Share’ companies linked directly to the country’s burgeoning consumption growth.

“You’re paying a lot more for the big state-owned enterprises becasue they are more liquid,” Watt said.

Similarly, Martin Currie’s Asia ex-Japan fund sought out ‘boring”, well-managed companies with strong cashflows and “cast iron business models”, which produced that Asian rarity – regular dividend payouts.

“The thing about Asia is that every five years a crisis comes along and can destroy all your value. Our fund is designed to cope with that,” Watt said.