Looking Beyond Traditional Benchmarks to Add Value in Emerging Markets

S&P Dow Jones Indices    Michael Orzano, CFA, John Welling
24 Jul 2017
Categories: Investment Management, Equity Investments

Country or region: Asia Pacific (Overall)

Summary:
As emerging markets have grown in size and importance, emerging market equities have become a core part of many portfolio allocations. In addition, the increased diversity and liquidity of emerging equity markets have made strategies commonly used to manage developed market portfolios (such as tactical allocations across regions and size segments) much more accessible to emerging market investors.
Despite these trends, the use of more complex asset allocation strategies within emerging market equities remains quite limited, as the vast majority of market participants continue to gain exposure to this asset class either via index-linked products that track traditional benchmarks or through active managers with mandates closely tied to those benchmarks. While accessing emerging markets through a single holding linked to a conventional benchmark can be an effective, low-cost way to obtain unbiased exposure to this asset class, evidence indicates that using a more discerning approach to managing emerging market portfolios may potentially add value in the same ways it can in the U.S. and other developed markets.


Reference URL: www.spdji.com/indexology


Date of original publication:

07/20/2017


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