Financial markets the world over have always been something of a rollercoaster. In which case, emerging markets – arguably the most exciting areas of them – can perhaps be viewed as being like a ‘big dipper’. Their history has certainly been marked by some extraordinary and tumultuous phases of boom and bust – with an exhilarating bull market often followed by a crisis and sudden crash, then a phoenix-like recovery followed by yet another further coruscating fall… and so on and so on.
Given such wild gyrations over time, it has been possible for some investors – given great skill or fortunate timing – to make great returns. But all too many have found investing in emerging markets to be a frustrating or humbling experience. It has proved terribly difficult for investors to make consistently strong returns over a longer time frame, especially in equities.
All too often, investors have gone into EMs and made what looked like fantastic returns, and then found themselves trapped – as markets crashed and they were too late get out ahead of capital controls or total loss of liquidity.
And yet… And yet the opportunity set in emerging markets continues to look compelling. EMs have driven the lion’s share of global economic growth for decades. Their combined economies now represent around half of global GDP – yet still under 10% of global market capitalisation.
At a time of rising populism and seismic political events in the developed world, from Brexit in Europe to President Trump in the US, and questions about a backlash against globalisation, we felt it might be opportune to host a roundtable where we re-examine the case for emerging markets; ask why they are of interest; and how to overcome the serious operational challenges of investing in them.
We brought together a range of different types of market participants – from macro and fixed income investors, to firms that run a variety of equity strategies from long-only to small and mid-cap to regionally-focused funds. Those taking part included portfolio managers, who have their eyes firmly on where to find the best opportunities, and senior operational managers, who must try and make the execution of those strategies work – while avoiding the pitfalls.
We were only able to do this with important support from our partners at Standard Chartered, who also brought their detailed knowledge and expertise in these markets to the discussion. We hope you find this resulting report illuminating.
Please browse the embedded version of the report below (best viewed in fullscreen) or fill in the form on the right to download a PDF version.