(Photo: AP)

Investor sentiment toward emerging markets has improved over the past year.

Columbia Threadneedle Investments reported Tuesday that its latest investor sentiment survey score had dropped by 9% from the second quarter, but was up by 27% from the end of 2015.

The survey’s score registered 627 in the poll conducted during December and early January, indicating that investors generally had a neutral outlook toward emerging markets for the coming year, the report said.

The sentiment score is calculated based on the answers to the question: “Over the next 12 months, what is your outlook for emerging market equities?” A negative outlook is scored as 0 points, neutral as 500 points and positive as 1,000 points.

Seventy-five asset managers and financial advisors participated in the poll, two-thirds of which were managing more than $100 million in assets.

The report said the results were consistent with market performance that showed emerging markets were up 10.8% in 2016, but underperformed the U.S. markets following the presidential election.

Forty-one percent of respondents said they currently had 1% to 5% allocated to emerging markets, and 32% had 10 to 55% allocated.

Sixty-nine percent reported that their current allocation was about the same as 12 months ago. Only 15% said their allocation was lower, compared with 37% that said this at the end of 2015.

Positive was the year-ahead outlook for emerging markets of 45% of respondents, way up from 26% at the end of 2015.

Nearly two-thirds of respondents expected to maintain their current allocation over the next 12 months, while only 28% expected to increase it. In contrast, 46% of investors in the second quarter survey said they would increase their allocation.

“While EM sentiment may have slipped slightly last year, the election did not significantly impact allocations, indicated by our respondents who said they mostly expect to maintain their allocation over the next year,” Marc Zeitoun, head of strategic beta at Columbia Threadneedle Investments, said in a statement.

“Representing 40% of gross domestic product, EM is not only the largest portion of the global economy, but the fastest-growing one.”

The survey also found that 44% of respondents do not use strategic beta funds in their portfolios. For those that do so, 28% said it was to lower overall fees and 26% to access a specific factor.

Asked which factors were most important in their evaluation of a strategic beta fund, 61% of respondents ranked index rules underlying the strategy as the first or second most important factor.

Absolute fund performance followed, ranked as the first or second most important factor by 49% of investors.

Tracking error and asset manager expertise were ranked as the least important factors.

“While strategic beta adoption has moved more quickly in other regions, we have found that EM investors who have embraced strategic beta have seen outperformance at a lower expense,” Zeitoun said.

“We are encouraged to see that 58% of respondents use strategic beta as a complement to a benchmark exposure or to an active manager.”