Emerging markets account for roughly 40% of global GDP and drive an estimated 70% of real global growth, IMF data shows, yet they represent just 11% of the MSCI All Country World Index (ACWI). That gap, however, is beginning to close.
Vincent Mortier, chief investment officer at Amundi, noted how the MSCI ACWI sits at roughly 65% US, with China and India together accounting for just 6% of the index.
“If you are a retail investor, it doesn't make sense,” he said. “I don't believe it is accurate.” With US valuations stretched and concentration risk in developed markets at historically elevated levels, he expects capital to migrate and emerging market currencies, backed by more orthodox monetary policy, to strengthen as it does.
The fund selectors Trustnet spoke to broadly agreed, though they were careful to distinguish between the reallocation narrative and the underlying investment case.
Andrius Makin, associate portfolio director at Killik, said: “Emerging markets look attractive on their own merits, not just as an alternative to the US. Earnings growth looks solid, valuations are compelling and flows are building”.
Below, three selectors share four strategies for capturing that opportunity.
A broad allocation
For investors seeking wide exposure, Alex Trett, investment trust research analyst at Winterflood Securities, pointed to the £1.4bn JPMorgan Emerging Markets Growth & Income trust.
Its focus on high-quality, growth-oriented businesses should suit an environment where picking through market noise requires both discipline and resources.
“Having a cycle-tested manager with deep resources, such as those of JP Morgan, is particularly important for cutting through market noise and maintaining a disciplined focus on long-term value creation,” Trett said.
The trust's technology and consumer weighting – financials at 26.9% and telecoms, media and technology at 46.4% – reflects a portfolio concentrated in the structural growth stories in Asia Pacific, which accounts for 60.2% of assets.
Performance over one year stands at 33.3%, though the five-year return of 18.2% reflects a more difficult period in the earlier part of that window. Emerging markets fell harder than developed markets in 2022, which is mostly attributed to headwinds such as a strong US dollar and interest rate hikes from the Federal Reserve.
An ongoing charge of 0.79% is the lowest of the four strategies featured.
Glenn Meyer, head of managed funds at RC Brown, approaches the same broad opportunity set through an open-ended route, highlighting Raheel Altaf's Artemis SmartGARP Global Emerging Markets fund.
The £2.5bn strategy has delivered strongly, up 37.2% over one year and 96.7% over five, placing it among the stronger performers in the IA Global Emerging Markets sector.
Performance of funds against index and sectors over 1yr
Source: FE Analytics
Meyer's broader macro thesis is that China's export trade faces headwinds from the US, making it “logical for China to increase trade with other Asian countries in what could become a mutually beneficial relationship,” he said.
“This potentially looks good for the whole global emerging market sector on a bottom-up basis and asset allocations could rise, particularly if money is re-allocated away from the US.”
For Makin, investors can get exposure to emerging markets through a tracker. His preference was the Fidelity Index Emerging Markets fund, as it has “one of the lowest running costs” of 0.20%.
More targeted options to own alongside a broader pick
There are also more targeted options investors should consider too. To go with his passive choice, Makin highlighted Utilico Emerging Markets.
This £518m trust targets listed infrastructure and utility businesses – electricity supply (23.1%), telecoms, media and technology (30.5%) and transport (9.1%) – with a heavy tilt towards the Americas (40.4% of assets) alongside the Pacific Basin (27.2%).
These are physical assets essential to delivering economic growth: energy infrastructure, digital connectivity, logistics, “well placed to withstand any AI-related disruption”.
The trust has returned 40.4% over the past year – the strongest one-year return of the four strategies featured here.
Both Trett and Makin flagged BlackRock Frontiers* as a natural complement to a standard emerging markets holding. The £369m trust deliberately sidesteps the largest markets, investing instead in frontier economies that receive little analyst coverage and sit outside most portfolios.
Performance of fund against index and sector over 1yr
Source: FE Analytics
This diversification shows with the trust’s correlation of just 0.44 with Artemis SmartGARP, 0.47 with JPMorgan Emerging Markets Growth & Income and 0.49 with Utilico.
The portfolio trades on a single-digit price-to-earnings ratio with estimated double-digit earnings growth, and the fund's focus on less glamorous sectors such as financials, consumer staples and industrials positions it well if investors continue rotating away from high-multiple stocks, Makin said.
Trett highlighted the trust's “genuinely differentiated return profile, driven by distinct structural and idiosyncratic factors rather than broad market beta”.
Sizing the position
Makin suggested a 10%-15% emerging-markets allocation for adventurous retail investors, 5% for defensive investors and somewhere in between for the balanced majority.
Volatility, Meyer acknowledged, is a given – “whether you are a timid mouse or a roaring lion, investing in equities carries risk” – and the right approach is to calibrate the overall equity allocation first and let the emerging markets slice sit within it.
| Name | Size | 5yr return | OCF |
| Artemis SmartGARP Global Emerging Markets Equity | £2.5bn | 96.7% | 0.84% |
| BlackRock Frontiers Investment Trust | £380m | 97.4% | 1.42% |
| Fidelity Index Emerging Markets | £2.1bn | 27.3% | 0.20% |
| Utilico Emerging Markets | £515m | 77.0% | 1.50% |
| JPMorgan Emerging Markets Growth & Income | £1.4bn | 18.2% | 0.79% |