Approach and sentiment towards emerging market investments

We hold around a 10% allocation to emerging markets within the equities portion of our client's investments and zero in bonds. This is pretty much in line with the global indices. We use emerging market equity index funds.

Emerging Markets have markedly underperformed the US in the last decade. However it's worth noting that they significantly outperformed in the 2000s. India has done well but China which is still struggling to get back to it's high levels of growth after Covid has done badly. The region is still home to most of the world's population , accounts for most of it's growth and future prospects and has inexpensive valuations. We think it still makes sense to continue to allocate to the region at least in line with global market cap weighted indices. It's interesting that Japan has recently been much keener to take measures to improve shareholder value and this is having a positive effect on its market. China may well do the same.

Investing 100% in emerging markets is a speculative strategy. We do not do this for any of the families that we look after. We tend to gain exposure to emerging markets by investing either a small amount in a specific emerging market fund such as Fidelity Emerging Markets or iShares Emerging Markets Equity Index or as part of a global allocation fund such as Fidelity Index World Fund.