How to get the most out of emerging markets

Edward Kerschner, Chief Portfolio Strategist

Capitalizing on the growth opportunity in emerging markets takes more than just an investment in the conventional benchmark index.

Emerging markets are an opportunity for growth-oriented investors — they are almost 40% of global GDP, and demographic trends suggest this will continue to grow. However, simply buying into the emerging market benchmark index provides little exposure to the largest growth opportunity. The big story in emerging markets today is the consumer sector. The rising affluence of more than three billion largely emerging market consumers is causing this sector to grow more rapidly than emerging markets as a whole. Emerging market benchmarks only have modest exposure to the consumer sector, accounting for about 15% of assets. In this video Ed Kerschner discusses how investors who are attracted to emerging markets can get the most out of their investment.

The views expressed are as of October 2016, may change as market or other conditions change and may differ from views expressed by other Columbia Management Investment Advisers, LLC (CMIA) associates or affiliates. Actual investments or investment decisions made by CMIA and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that any forecasts are accurate.

International investing involves certain risks and volatility due to potential political, economic or currency instabilities and different financial and accounting standards. Risks are enhanced for emerging market issuers.

“Emerging markets are about 40 percent of the global economy. That’s doubled in the past 25 years. Now, the emerging markets are the largest economy in the world.” Source: IMF –World Economic Outlook, October 2016.

“Productivity -- emerging markets is forecasted to grow…more like one or two.” Source: Compiled by Columbia Management Investment Advisers, LLC using data obtained from ILO and World Bank, as of September 26, 2016.

“Growth of five, six, seven percent in the economies in the emerging markets…stuck at around one or two percent.” Source: IMF, October 2016.

“Forecast to be the most rapidly growing economy in the world.” Source: IMF, October 2016.

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