Emerging Markets – Past, Present and Future
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.
Emerging markets currently trade at steep discounts to developed markets, even when compared to the historic averages. For example, the price-to-book of the MSCI Emerging Markets Index currently stands at a 40 per cent discount versus developed markets, while historically the discount has hovered around 17 per cent.
Poor performance in recent years was also driven by a high level of share issuance, which diluted share price growth. But moving forward, share issuance is expected to be lower as companies have strengthened their balance sheets and reduced debt. There are even indications that a number of companies are planning share buy-back programs.
These two drivers combined make the outlook for emerging market returns much more positive than it has in the past few years.
Emerging Markets and Factors
Analysis by Northern Trust Asset Management shows the next three to five years, emerging market companies are predicted to achieve significantly higher earnings growth compared to their developed markets peers, particularly in countries such as Taiwan, India and Korea.
And investors who prioritise attractively valued, efficiently managed companies could do well in the period ahead.
In this webinar co-hosted with Northern Trust Asset Management, we will 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.
Northern Trust Asset Management will show how style factors have historically delivered consistent sources of excess and risk-adjusted returns in emerging markets, paralleling trends seen in developed markets.
Speaker
Michael Hunstad is Deputy CIO and Head of Global Equities at Northern Trust Asset Management with oversight of all equity portfolio management, research and trading activities including quantitative, index and tax-advantaged strategies.
Previously, Michael was Head of Quantitative Strategies where he was responsible for leading Northern Trust Asset Management’s factor based research, portfolio management and product development programs.
Prior to joining Northern Trust, he was head of research at Breakwater Capital, an algorithmic trading firm and hedge fund. Previously, he was head of quantitative asset allocation at Allstate Investments, LLC and a quantitative analyst with a long-short equity hedge fund. He also served as an adjunct professor at the Illinois Institute of Technology.
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