The Case for Emerging Markets

By Wes Crill, PhD, Senior Client Solutions Director and Vice President

The Case for Emerging Markets
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Apr 13, 2023

1 Minute Read

Topic

Equity Investing Investment Principles

Emerging markets account for over 11% of the total global equity market,1 meaningfully expanding the opportunity set compared to developed markets alone and providing a valuable diversification role for an investor’s portfolio. Emerging and developed market indices have also taken turns as the top performer over the past quarter-century; performance in emerging markets nicely complemented developed during the latter’s swoon in the 2000s. 

When the time comes again for emerging markets’ moment in the sun, investors may benefit from having exposure through a fund manager with a demonstrated track record of success in the space. Like most asset classes, surviving and outperforming index benchmarks in emerging markets has been a tall task for active equity funds. Of the 168 emerging markets funds available 10 years ago, just 68% remained available at the end of 2022, and only 30% outperformed their prospectus benchmark.2

Past performance is not a guarantee of future results. Returns in USD. Indices are not available for direct investment. Their performance does not reflect the expenses associated with management of an actual portfolio. MSCI data © MSCI 2023, all rights reserved.

Footnotes

  1. 1Emerging markets represented 11.4% by market capitalization of the MSCI All Country World IMI Index as of December 31, 2022.
  2. 2The sample includes funds in the Morningstar Diversified Emerging Markets category at the beginning of the 10-year period ending December 31, 2022. Survivors are funds that had returns for every month in the sample period. Winners are funds that survived and outperformed their benchmark over the period. US-domiciled, USD-denominated, non-Dimensional open-end and exchange-traded fund data is from Morningstar.

Disclosures

All expressions of opinion are subject to change. This information is not meant to constitute investment advice, a recommendation of any securities product or investment strategy (including account type), or an offer of any services or products for sale, nor is it intended to provide a sufficient basis on which to make an investment decision. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions. Diversification neither assures a profit nor guarantees against loss in a declining market. Diversification does not eliminate the risk of market loss. International and emerging markets investing involves special risks such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks.


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