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Here’s why we believe in EMs:

1. A track record of outperformance

Since 1970 EMs have outperformed developed markets. While the MSCI EM index shows an annualised return of 11.3% per annum up to November 2015, the annualised return of the MSCI World index was almost half, at 6.6%. Expressed as amounts, if had you invested $1 million into EMs back in 1970, the value of that portfolio would now be $134 million; the same amount invested in developed markets would be worth only $17 million.

But returns don’t come in a straight line, as the more recent returns of EM companies show.

2. Attractively priced at the moment

Investors who jumped into emerging markets (EMs) after 2010 experienced a bumpy ride with emerging markets significantly underperforming their developed market counterparts. We are now five years into an EM bear market and it would be fair to say that EMs are very much out of favour. EMs have derated considerably relative to developed markets and valuations are currently looking very favourable.

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