The case for emerging market equities in an era of transitioning secular drivers
The drivers of emerging market equity returns are evolving as innovation and economic decoupling join favorable demographics as future sources of excess returns. The Emerging Market Equities Team believes that while the asset classās potential has increased, it must be approached in a risk-aware manner that prioritizes selectivity.
6 minute read
Key takeaways:
- In the past, EM equities offered opportunities to capitalize on economic growth differentials, convergence and outsourcing. Today, EM companies provide valued-added innovation with strong potential for future earnings growth.
- Reformist governments are supporting the private sector to achieve national objectives such as health care delivery, energy security, and improved access to financial services.
- With an active, risk-aware EM approach, investors can gain exposure to the secular themes of innovation, decoupling and favorable demographics within an increasingly evolving asset class.
The widening range of economic and market outcomes for emerging markets can often lead to periods of increased market volatility. How can a multi-lens approach premised on country, company and governance better capture excess returns, and potentially dampen the volatility inherent in the asset class?
Note: There is no guarantee that past trends will continue, or forecasts will be realized.
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Emerging market: the economy of a developing country that is transitioning to become more integrated with the global economy. This can include making progress in areas such as depth and access to bond and equity markets and development of modern financial and regulatory institutions.
Volatility: the rate and extent at which the price of a portfolio, security or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. The higher the volatility the higher the risk of the investment.
JHI
Important information
Please read the following important information regarding funds related to this article.
Key investment risks:
- The Fund's investments in equities are subject to equity securities risk due to fluctuation of securities values.
- Investments in the Fund involve general investment, currency, liquidity, hedging, market, economic, political, regulatory, taxation, securities lending related, reverse repurchase transactions related, financial and interest rate risks. In extreme market conditions, you may lose your entire investment.
- The Fund may invest in financial derivatives instruments to reduce risk and to manage the Fund more efficiently. This may involve counterparty, liquidity, leverage, volatility, valuation and over-the-counter transaction risks and the Fund may suffer significant losses.
- The Fund's investments are concentrated in emerging markets (excluding China) and may be more volatile.
- The Fund may charge performance fees. An investor may be subject to such fee even if there is a loss in investment capital.
- Investors should not only base on this document alone to make investment decisions and should read the offering documents including the risk factors for further details.
6 minute read
Key takeaways:
- In the past, EM equities offered opportunities to capitalize on economic growth differentials, convergence and outsourcing. Today, EM companies provide valued-added innovation with strong potential for future earnings growth.
- Reformist governments are supporting the private sector to achieve national objectives such as health care delivery, energy security, and improved access to financial services.
- With an active, risk-aware EM approach, investors can gain exposure to the secular themes of innovation, decoupling and favorable demographics within an increasingly evolving asset class.