Since the turn of the century emerging market (EM) assets have provided investors with higher returns relative to developed market (DM) assets.
2013 however, provided a salutary warning to investors about the dangers of assuming a good thing will last forever as EM assets significantly underperformed DM assets.
We start this note by considering what we mean by EM assets and how investors have historically gained exposure to these assets. We conclude, perhaps unsurprisingly, that the past is not a good guide to the future and investors should re-consider their approach to investing in EM assets.
The second part of this note then goes on to consider, in light of our conclusions in the first part, how trustees should assess their exposure to emerging economies.