Wellington Management
February 24, 2023
Tracing our history to 1928, Wellington Management is one of the largest independent investment management firms in the world. We serve as a trusted adviser for institutions in more than 60 countries.

EM evolution: New paths in equity portfolio construction

The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

By:  Adam Berger, CFA, Multi-Asset Strategist; Supriya Menon Multi-Asset Strategist; Nick Samouilhan, PhD, CFA, FRM, Multi-Asset Strategist

Key points

  • Given significant market and economic changes over the past decade, it may be time to rethink EM equity exposures.
  • Complementing EM core equity strategies with niche-ier “EM 3.0” strategies may help round out an overall allocation and improve diversification.
  • We see compelling arguments for allocating all or most of an EM portfolio to active strategies.

Over the past couple of years, our discussions with investors have at times revealed emerging market (EM) portfolio policies that are stuck in the past — in some cases, policies that were established a decade or more ago. In that span, we’ve witnessed massive change in the EM universe, including a near doubling of China’s weight in the MSCI Emerging Markets Index from 17.4% to 31.4%. 1

We believe the time has come for EM equity exposures to evolve. In this paper, we lay out a simple framework investors can use to structure their EM equity portfolios given the wider range of implementation approaches available today. We also address the active/passive decision in EM portfolios and offer ideas on the manager selection process.

Learn more here

1 Source: FactSet, MSCI; 10 years ended 30 September 2022
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