Rising Investment Optimism for Emerging Market ETFs

Emerging market exchange traded funds have been attracting greater investment interest as a greater number of asset managers and financial advisors express improved sentiment over developing economies.

According to a recent Emerging Markets Investor Sentiment Survey conducted by Emerging Global Advisors, the quarterly poll of asset managers and financial advisors are showing an increased interest in allocating toward the emerging markets.

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Over the next 12 months, 47% of respondents had a “positive” outlook for emerging market equities, followed by 43% “neutral.” The results also showed a increase in the number of “positive” views when “neutral” was the most common answer in the first quarter of 2016.

Looking ahead, 46% of respondents expect to raise their emerging equity exposure while 49% will keep emerging market exposure as is. The majority of respondents, 78%, indicated that their current emerging market exposure is about the same or higher year-over-year while only 22% say it is lower.

About a third of the money managers have either 5% to 10% or 1% to 5% allocated to emerging markets.

Additionally, a number of respondents evinced their preference for smart-beta emerging market strategies, pointing to alpha generation and accessing specialized exposure as the most important attributes of smart-beta ETF strategies. Almost half, 49%, of investors have replaced or want to replace an active manager with a smart-beta ETF.