While emerging markets were only recently seen as an exotic investment, their promise for high returns, growing stability and increasingly influential impact on the rest of the globe has caused mutual fund and pension managers to reassess their importance, The Wall Street Journal reports in a story titled: “A Bigger Risk Than Emerging Markets: Staying Out.”
“Without question, we have steadily increased our exposure to emerging markets over the last couple of years, and I think that’s a trend that continues,” said Bill Quinn, executive chairman of American Beacon Advisors. “Most pension funds have maybe 5% to 10% in emerging markets. I bet in 10 years, that number is closer to 30%.”
One of the reasons asset managers are so bullish on emerging markets is the ground they gained during the recession, while the rest of the world in developed nations languished. Emerging markets are expected to gain on that steam in the years ahead.
Indeed, the MSCI Emerging Markets Index is up 68% this year, compared with the 24% rise in the Standard & Poor’s 500 Index. Regionally, the Sensex in India is up 79%, Brazil’s Bovespa is up 80%, and China’s Shanghai Composite is up 69%.
Investors are definitely taking note; emerging market mutual funds have reaped $75 billion in flows so far this year, according to EPFR Global.