As investors worry about the state of Europe and other developed equity markets post Brexit, inflows have been returning to emerging market funds with the IA Global Emerging Markets sector attracting £29m of investor money in July this year.

Indeed LGIM’s lead fund manager of multi-index Justin Onuekwusi recently began increasing his weighting to emerging market index funds, fuelled largely by their close ties to the oil price and links with any moves in interest rates by the Federal Reserve.

Having having recovered significantly from its lows, Onuekwusi says he has been seeing upside risks in the price of oil in recent weeks, with supply looking like it is falling back in line with demand.

“However rather than see this is a concern, we see these recent falls as an opportunity to began increasing our exposure to the energy sector again, while as sectors relating to oil become of more appeal, so to do the prospects for global emerging markets as the the fortunes of many economies are linked to oil and mining companies.”

So where are fund managers investing in global emerging markets currently looking to capitalise on the improvements in investor sentiment? We spoke to three to find out.

Gonzalo Pángaro – manager of the T. Rowe Price Global Emerging Markets Equity fund

“Earnings expectations for 2016 started at a more modest level and, interestingly, have shown some signs of improvement more recently. The short-term revival in commodities, oil, and currencies has helped, but we are also seeing a lot more examples of self-help within companies, with a focus on cost control, capex efficiency, and improved returns. For the first time in five years, productivity has moved above real wage growth in some key markets. This will help lift margins from their lows and improve corporate earnings growth.

“Our fund continues to have a growth tilt, with overweight positions to consumer-related names, Financials, and Information Technology (IT). We are underweight to sectors where we believe there is a relative lack of growth opportunities such as energy, materials, and telecommunication services. We are overweight India, where GDP growth is strong, and have identified opportunities in areas of the market – including Banks and Automobile Manufacturers.

Jorry Rask Nøddekær – manager of the Nordea 1 – Emerging Stars Equity fund

“The improvement in sentiment, combined with very low valuation levels – both from an absolute and a relative to developed markets perspective – should generate good returns in the second half of 2016. Valuation levels are attractive, even from a short-term perspective, and sentiment is weak. This is generally indicating a good time to buy for long-term investors.

“Looking at some of the key markets, we remain supportive on China and its transformation from a government-led investment driven economy to a service and urban consumption driven economy. India also remains a very attractive market. Over the next 12 – 18 months we see a nice cyclical rebound in the economy combined with some steady positive development on reforms.In the ASEAN region we are still positive on the Philippines, but we can also see some positive surprises. The three big question marks in emerging markets remain Brazil, South Africa, and Russia – the common denominators here are commodities and politics. As such, we remain underweight in these countries.

Conrad Saldanha – manager of the Neuberger Berman Emerging Markets Equity fund

“While emerging market GDP growth has slowed, it still offers a premium to developed economies. Global interest rates also now offer a benign backdrop, with US interest rates increases seemingly on hold and negative interest rates in the EU and Japan. Also, emerging market currencies that had retreated in 2015, have shown resilience in 2016. With all of these positive factors, we are looking for key emerging market countries to execute on reform initiatives, which could aid domestically-driven growth.

“This is reflected in our portfolio’s top sector overweight, which is now Consumer Staples. IT is the second largest weight, where we have found names linked to the global – or in some cases – local consumer. At the country-level, we have increased our underweight to China as we have found better domestic opportunities elsewhere. India maintains its position as our top country overweight; despite the upcoming leadership change at the RBI, we have observed local reforms are already in process there that could be supportive of the names we own.”