As an investor for more than two decades and a lifetime world traveler, I am an advocate of looking beyond borders to find new opportunities and experiences. I’ve spent more than two decades in research and portfolio management roles, the latest step in the journey bringing me to BlackRock where I’m a member of the Global Investment Strategy Group focusing on timely investing themes. I’m also a runner, and my love of the sport has brought me to marathons on all seven continents – yes, including Antarctica – as well as foot races, mountain hikes and triathlons in most of the 60+ countries I’ve visited. Being on the ground in so many different places has really driven home the immense scale of the global markets, and specifically that it’s increasingly possible to partake in the economies of emerging and frontier market countries like China, Turkey, Mexico, Brazil, and Kenya, to name a few. This firsthand experience has made me optimistic about the potential of emerging and developing economies, and their attractive valuations coupled with improving investor sentiment have me convinced that now is a favorable time to invest in these regions.
Recent flows data shows that investors are returning to emerging markets equity after turning away from the category early last year. Emerging markets equity funds gained $4.7 billion in August. My colleague, Russ Koesterich, has also discussed the merits of emerging and frontier markets as strategic asset classes in previous Blog posts. But this all begs the question – how does an investor boost their exposure to this corner of the globe? One solution: exchanged traded funds (ETFs).
Turning to ETFs
In recent decades the world of investing has changed dramatically, and nowhere is this more apparent than how investors approach tactical investing. What do I mean by this? Actively managed funds seek to outperform a specific benchmark, and portfolio managers often have full discretion over how they attempt to do so. As such, many actively-managed funds aren’t all that precise in the exposure they provide. Today, seeking exposure to a specific emerging or frontier market, or to the broader emerging and developing universe, is easier to do than it would have been just a decade ago as the index-tracking ETF market continues to grow.. What’s more, ETFs offer diversification and liquidity; they are also generally available at a lower cost than comparable actively managed funds.
If you’re looking for a direct way to gain broad exposure to emerging market equities, and how to pursue specific opportunities within this asset class, stay tuned for my next post.
Heidi Richardson is a Global Investment Strategist at BlackRock, working with Chief Investment Strategist Russ Koesterich. She is the newest contributor to The Blog.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/ developing markets, in concentrations of single countries or smaller capital markets. Frontier markets involve heightened risks related to the same factors and may be subject to a greater risk of loss than investments in more developed and emerging markets.