Sponsored by Aberdeen Standard Investments
Overview
- Investors remain under-allocated to emerging markets (EM) despite the region’s growth
- Suboptimal allocations to EM equity and debt can lead to missed long-term portfolio opportunities
- EM sub-asset classes have distinct profiles that can offer enhanced diversification
- Frontier markets have low correlations to other asset classes
Global investing has changed
Over the past few decades, the negative correlation between equities and bonds, as well as low valuations (that have expanded) and high yields (that have declined), has led to strong returns for investors in most balanced portfolios, such as the traditional “60/40” approaches consisting of 60% domestic equity and 40% domestic bonds. However, these outcomes are likely to change going forward. High valuations across asset classes today, as well as the likelihood of increasing yields and rising inflation over the coming years, will challenge investors’ ability to experience the same level of risk-adjusted returns. To help achieve their objectives, investors should consider opportunities to better diversify their portfolios. Many of these can be found within EM.
