What Should Investors Be Doing in Emerging Markets?

January 12, 2015 |Author: Edward M. Kerschner, CFA, Vice Chairman | Category: Emerging Markets




Investors should be focused on accessing those areas of emerging markets that offer potential growth and diversification.  We are focused on two areas: those "Beyond BRIC" countries (Brazil, Russia, India and China) and those sectors that could benefit from the emerging affluent.  

First, smaller, less mature emerging markets and frontier markets, those economies "Beyond the BRICs", have offered less volatility, diversification by virtue of their lower correlation to the S&P 500 Index and better risk-adjusted returns than the MSCI Emerging Market Index.  Additionally, those countries offer rapid labor force growth and productivity drivers that could help them lead future growth in emerging markets.

Second, investors should tap the growing middle class in emerging markets through those sectors and industries that are less mature and more tied to local demand rather than global demand or interest rates.  The global middle class is projected to grow in size and spending power by over 150% over the next 20 years , with the emerging market middle class rising from 4% of global population in 2000 to 15% in 2030.

Learn more about solutions to address these opportunities:

EGShares Beyond BRICs Exchange-Traded Fund (ETF)
EGShares Emerging Market Consumer ETF

 

Sources

Correlation and risk-adjusted rates of return sourced from: MSCI, Bloomberg as of 9/30/2014. Past performance does not guarantee future results.
Labor force and productivity growth sourced from: The Emerging Middle Class in Developing Countries, OECD, January 2010.
Global middle class growth sourced from: Global Economic Prospects: Managing the Next Wave of Globalization, World Bank, 2007.


Additional Disclosures

Edward M. Kerschner is a registered representative of ALPS Distributors, Inc.

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