Over the last 10 years, the performance of emerging markets have proven a deep disappointment, prompting investors to reconsider their allocations.
But as we all know, past performance is no guarantee of future performance and this statement holds true on the upside as well.
In this webinar co-hosted with Northern Trust Asset Management, we review some of the key drivers behind the poor performance in recent years and explore why the future might look differently.
We will also consider how a factor framework might help in capitalising on these opportunities, including style factors such as quality, value, momentum and low-volatility.
Transcript (with timings)
2:09 – A snapshot of global equity performance year to date shows that developed market returns are double digits across the board, with emerging markets lower but improving throughout the year. China in particular had a huge turnaround since early September.
4:00 – Which EM markets have the highest growth expectations over the next 3-5 years?
6:03 – Share issuance has negatively impacted EM excess returns vs developed markets over the last 10 years.
9:30 – Some tactics can investors use to combat this
11:57 – Factor performance can vary across markets. It may not be as much as some might expect, but there is still value in investing across both.
16:00 – Design matters when it comes to factor investing in EM.
17:44 – Beta and momentum are not so consistent in emerging markets.
19:30 – ‘Composite equity issuance’ can be a fantastic predictor of return.
23:42 – Is the rate of share issuance set to continue at similar levels?
25:13 – Across all markets there is not a high correlation between GDP growth expectations, earnings growth expectations and actual equity performance. What other factors are at play?
29:20 – What are some of the risks of having a simplistic approach to factor investing in EM?
31:22 – Can you time factors in EM?
33:40 – ‘Shrinkage’ approaches can be very effective and result in a more robust portfolio.
35:27 – The US economy is very influential on emerging markets, but it can be good for factor performance.
Speaker: Michael Hunstad, Deputy CIO and Head of Global Equities, Northern Trust Asset Management
Moderator: Wouter Klijn, Director of Content, Investment Innovation Institute [i3]