The trend among institutional investors in recent years has been for shrinking allocations to emerging market equities (EME). The lower level of institutional interest in EM equities, however, is rooted in performance: EM equities have underperformed relative to their developed markets (DM) counterparts for over a decade. The outlook for EM equities is attractive relative to their global DM counterparts, and in our judgement, there is a strong argument for institutional investors to consider increasing allocations to EM.

Key points:

• EM has grown to represent more than half of global GDP and perhaps more importantly, accounts for two-thirds of global GDP growth.

• We believe that superior growth from EM should accelerate, driven by urbanization and demographics, which we expect in turn can lead to a rapidly expanding consumer class.

• Despite the disappointing relative performance of the MSCI EM Index over the past decade, many EM countries are poised to outperform in the years ahead.

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