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Taking the high road to emerging markets
With volatility and dispersion increasing in emerging market equities, long-term investors can guard their portfolios by actively integrating ESG into their decisions.
Despite concerns over the strength of the US dollar, domestic political uncertainty and fears of a US versus China trade war that have rattled emerging markets in 2018, this is an asset class that will likely become increasingly important for investors in the long term.
When comparing regions on a purchasing power parity basis, gross domestic product for emerging economies represents 59 per cent of the global total; a 23 percentage point increase over the past 30 years, according to the International Monetary Fund.1
The growing influence of EM is also reflected by relative investment performance over the long term, as shown in the chart below. The annualised return of EM equities since the start of 2001 is about 9.26 per cent for the MSCI EM index, compared to 5.33 per cent for the MSCI World and 5.43 per cent for MSCI ACWI indices.
1 GDP based on PPP, World Economic Outlook published by the International Monetary Fund, October 2018.
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