Our Active Emerging Markets Solution vs. Passive Investing
David Semple, Portfolio Manager, Emerging Markets Equity Strategy
Oksana Miller , Product Manager
December 16, 2019
The rise of passive investing in emerging markets shows no signs of abating. Very many indices have been created and new ETFs are being proposed to further carve up the asset class. And yet, the VanEck Emerging Markets Equity Strategy continues to outperform a broad emerging markets index (“MSCI EM Index”) over multiple periods. The Strategy has also outperformed the Active Emerging Markets Equity Peer Group,1 as outlined below. This has caused us to reflect again on the relative role, advantages and disadvantages of active vs. passive investing in emerging markets. This white paper aims to explain emerging markets index limitations and inefficiencies, and discuss the VanEck Emerging Markets Equity Strategy as an active solution and its fit within an investor’s total portfolio allocation framework.
VanEck Emerging Markets Active Solution vs. Passive Investing
Historical Trailing Returns over 10 Years (2009-2019)
1The Active Emerging Markets Equity Peer Group is defined as the Global Emerging Markets Equity All Cap Category in eVestment.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The reader should not assume that an investment in the securities identified was or will be profitable. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
Emerging Market securities are subject to greater risks than U.S. domestic investments. These additional risks may include exchange rate fluctuations and exchange controls; less publicly available information; more volatile or less liquid securities markets; and the possibility of arbitrary action by foreign governments, or political, economic or social instability.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets countries. The MSCI Emerging Markets Investable Market Index (IMI) is a free float adjusted market capitalization index that is designed to capture large-, mid- and small-cap representation across 24 emerging markets countries. Emerging markets countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
Morningstar U.S. Diversified Emerging Markets Category includes portfolios tend to divide their assets among 20 or more nations, although they tend to focus on the emerging markets of Asia and Latin America rather than on those of the Middle East, Africa, or Europe. These portfolios invest predominantly in emerging market equities, but some funds also invest in both equities and fixed income investments from emerging markets.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
Portfolio Manager, Emerging Markets Equity Strategy
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