Emerging markets offer the potential for high growth and portfolio diversification for investors seeking increased exposure to international equities beyond developed markets. This growth, fueled by strong secular trends including favorable demographics and advancing economies, is likely to remain in place in the years ahead.
Why Emerging Markets Equities Deserve a Close Look
- High-growth potential: EM economies are expected to outgrow developed markets by over 2% per year through 2028
- Vast opportunity set: The EM investable universe far exceeds the U.S. market by thousands of stocks
- Outperformance potential: EM stocks have less analyst coverage than U.S. stocks, creating an opportunity to uncover opportunities
- Attractive valuation: EM stocks are trading near their widest valuation discount relative to U.S. stocks since 2000
- Underrepresentation in the global stock market: EMs represent approximately 42% of global GDP, but only 11% of the MSCI All Country World Index’s (ACWI) weighting, creating an underweight in economic exposure to emerging markets
INDEX DEFINITIONS
The MSCI All Country World (ACWI) is a free float-adjusted market capitalization-weighted index that measures equity performance of developed and emerging markets.
IMPORTANT RISK CONSIDERATIONS
Market Volatility: The value of the securities in the portfolio may go up or down in response to the prospects of individual companies and/or general economic conditions. Local, regional, or global events such as war or military conflict, terrorism, pandemic, or recession could impact the portfolio, including hampering the ability of the portfolio’s manager(s) to invest its assets as intended. Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small, medium, or large-sized companies may enhance that risk. Foreign & Emerging Markets: Investing in foreign securities, especially in emerging markets, subjects the portfolio to additional risks such as increased volatility, currency fluctuations, less liquidity, and political, regulatory, economic, and market risk. Diversification: There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio, or that diversification among different asset classes reduces risk. Geographic Concentration: A portfolio that focuses its investments in a particular geographic location will be sensitive to financial, economic, political, and other events negatively affecting that location.
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