“Family offices have become disillusioned with emerging markets as EM stocks have underperformed since 2021, led by Chinese stocks,” Edmund Shing, international funding officer at BNP Paribas Wealth Control, said at the upcoming opening ceremony. Monte Carlo Tournament Panel.
The outperformance of US large-cap stocks also contributed to portfolio managers shifting their allocations, as this increased geopolitical potential around China and foreign exchange volatility in countries such as Turkey.
Similarly, the weighting of the index price range underwent a homogeneous rebalancing. Their performance in the growing world has been diminished by the underperformance of its markets, while the outperformance of US equities has led to greater exposure to North American companies such as the so-called “Magnificent Seven” technology companies.
This may be a shift that partly reflects the division of the global outlook of some asset managers into two factions: one democratic and investable, the other authoritarian and intensive.
“Emerging markets are more difficult to analyze and understand, because their drivers are largely geopolitical, FX- and macro-driven,” Shing said at the Treasuries discussion board tournament.
“The US is a large very liquid market with a common currency,” he said, “whereas the EM is a collection of markets with less liquidity, country-specific drivers and a basket of currencies to boot.”
This transformative spirit is sponsored through the annual International Asset Tracker (GAT) survey of funding executives, conducted through Skilled Wealth Control, an FT e-newsletter. In 2023, 78 percent of them rated international EMs as the “attractive” or “most attractive” asset aesthetic. By 2024, this share had fallen to 38 percent. American objectivity has recently been the dominant regional topic. The CIOs participating in the actual survey constitute 54 private banks and manage total consumer assets of more than $22 trillion.
The once ubiquitous obsession with the beauty of wealth has similarly diminished within the public offices that manage wealth for wealthy dynasties. Didier Duret, head of funding at Geneva-based Omega Wealth Control, says this is again due to the “massive underperformance” of emerging markets over the past decade compared to developed markets. “EMs have essentially been victims of the deglobalization of investment flows,” he argues.
According to Durrett, the likely factors – political, dependence on China’s fate, market outlook and the possibility of underperformance – are all together high.
He recalls the “golden days”, when veteran investor Mark Mobius, who once controlled $50 billion in EM assets for Franklin Templeton, was “kicking the tires” on thriving factories in Asia, and the Treasury discussion board. Used to make headlines. Ratio insight with your disciples.
That year’s conservatism relied on the ‘BRIC’ funding theme – supporting the growing economies of Brazil, Russia, the Republic of India and China – popularized by former Goldman Sachs economist Jim O’Neill, who later became UK acting minister of finance.
“Gone are the golden days of BRICS, where allocations were promoted as strategic,” says Durrett. “The current allocation reality in family offices is pragmatic – more strategic, selective and based on the proven merits of the companies.”
Nevertheless, there are some private banks and investment corporations that find exceptions to the arguments for EM divestment. BNP Paribas supports funding in South Korea and Turkey to provide “a combination of value and fundamental catalysts”. French investors also like EM independent bonds for their prime yields and “decent fundamental outlook”, which compare favorably with US and ECU independent and company bonds.
Meanwhile, according to Omega’s Durrett, there are some public workplaces that specialize in “specific areas that have a place in the AI sun” – with companies in Taiwan and Malaysia among the first. They also like companies from the Republic of India and Vietnam that are taking advantage of restructuring supply chains.
For many of these buyers, the Republic of India is the EM “bright spot”. “India increasingly looks like the next big thing in geopolitics, as it naturally benefits from the West’s ‘de-risking’ approach towards China,” says César Pérez Ruiz, head of investments at Pictet Wealth Control in Geneva. Is.” Due to the West’s geopolitical dispute with Beijing, Southeast Asian countries are also most likely to adopt manufacturing shifted from China.
Shing sponsored the Republic of India in the Treasure Discussion Board Tournament, despite the fact that he was cautious not to offend Beijing. “High-net-worth investors still like Modi’s India transformation story and his ability to catch up with China on the economic front,” he said. However he added: “Chinese stocks, although still volatile, may be a good long-term investment for patient investors at this point.”
Despite the fact whether portfolio managers and buyers are behaving rationally when undervaluing rising markets is a controversial issue.
According to Chris Richmond, head of observer analysis at asset control consultancy WTW, the EM portfolio allocation, at 10 to 15 percent, is not even moderate, GDP-weighted.
He justifies the fact that maintaining stocks in US exporters provides an integrated allocation to EM dynamics to maximum buyers. “If you look at the earnings in global equities in the US market, you take on a huge amount of emerging market risk” – and that creates “little incentive for a more strategic, long-term weighting,” he says.
However, he no longer believes this is the most efficient option for investing in emerging markets. “We believe we can find a manager that does a really good job in emerging markets and, through active management, is investing in some world-class companies that have leading positions in their sectors,” He explains. “They exist and it is a great investment opportunity. It is very difficult.”