Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Hedgie: Goldman wrong on emerging markets

Working inside the new 'Gold' subway line under construction in Mexico City.
Yuri Cortez | AFP | Getty Images

Goldman Sachs is wrong to tell its clients to cut their exposure to emerging markets, according to top developing world-focused hedge fund manager.

A recent report from the bank told its wealthy patrons to cut their emerging market exposure by a third. Goldman warned of "the strong possibility of significant under-performance and heightened volatility over the next five to 10 years" because of weak economic and governance structures.

(Read more: Goldman: Cut your emerging markets exposure by a third)

"The case for the structural reforms that need to be done in emerging markets—you could have made the same case 10 years ago. You would have missed a decade of outperformance," said Marko Dimitrijević, head of $2 billion Everest Capital, when asked about the Goldman report Tuesday. "If you reduce or ignore emerging markets, you're going to miss on literally hundreds of companies that are great."

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Dimitrijević's returns expectations for emerging markets in 2014 are only slightly higher than Goldman's.

The bank expects "high single-digit" returns for stocks, while Dimitrijević expects between 10 percent and 12 percent returns in both emerging and developed country indexes. But the real juice, he said, is in specific sectors like education in Brazil; infrastructure in Mexico; and real estate, consumer credit and brokerage companies in Japan; retail, cement, oil and gas in Colombia; and general consumer plays in Saudi Arabia.

(Read more: Bulls of Rio: JPMorgan Brazil fund feeling upbeat)

Generally, Everest is more bullish on frontier markets. Dimitrijević called them "EM 2.0" because of their similarity to emerging markets like Brazil, Russia, India and China—the so-called BRIC nations—when investors first began to pile in.

"It's a secular opportunity that reminds us very much of what now-mainstream emerging markets were like 15 or 20 years ago," Dimitrijević said. "If we're right, they will enjoy a decade of outperformance versus developed and larger emerging market cousins."

The Miami-based firm's flagship macroeconomic hedge fund, Everest Capital Global, rose 41.2 percent net of fees in 2013, according to investor materials obtained by The fund runs about $525 million and launched in 1990.

By comparison, the MSCI AC World index gained 22.8 percent. Everest's dedicated frontier fund, $445 million Everest Capital Frontier Markets, also rose 28.8 percent last year, versus an index rise of 25.9 percent.

—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.