The Real Deal With Emerging Markets

Emerging markets give many investors cold feet. On our latest podcast, EM equity pro Gordon Fraser discusses whether now may be time to warm up to the elusive asset class.

Emerging markets (EMs) are largely unfamiliar territory for U.S. investors ― and if portfolio allocations are any indication, many of them are keeping their distance.

EM equities come with more risk than their developed counterparts, but over time they also can be a source of growth and diversification in a portfolio. And while more than two dozen countries are classified as emerging markets, no two are exactly alike.

On the latest episode of The Bid, host Mary-Catherine Lader spoke with Gordon Fraser, EM portfolio manager within BlackRock’s Fundamental Active Equity group, about the outlook for EM stocks and why now may be a good time to take a closer look.

Mary-Catherine Lader: What makes a market “emerging”?

Gordon Fraser: Many people think rich countries are developed and the poorer countries are all emerging. That’s a bit of a misconception. In emerging markets, you have some very rich countries like Qatar or the UAE together with quite poor countries such as India or Pakistan. It’s also not about technological development. South Korea, for example, is extremely developed from a technological standpoint. What really defines an emerging market is how developed the stock market is. It’s about index classification and how well a market functions.

China, India and Brazil are some of the well-known EMs. Colombia and Peru are examples of smaller ones. The least established markets are called frontier markets. These are very illiquid. Some countries in Africa would fall into that bucket, like Nigeria or Kenya, or even Vietnam in Asia.