Geopolitical events and an already strong and rising U.S. dollar have made for a turbulent year in emerging markets.
Risks intensified and impacted valuations across the asset class, with plenty of issues on investors’ minds, including Russia’s invasion of Ukraine, extensive flooding in Pakistan and debt stress caused by similar climate change-related events, and ongoing supply chain disruption from the lingering impacts of the pandemic. And that doesn’t yet mention China, which continues to loom large above all, this year prompting worry of a potential invasion of Taiwan.
GMO has been investing in emerging equity and debt for almost 30 years. At this year’s Fall Conference, our emerging markets experts offered fresh perspectives on the asset class and presented some of the innovative ways we are investing in emerging countries going forward.
Explore our content below and Contact Us or your GMO representative for more information. Intended for accredited investors.
Reimagining Emerging Markets for a New World Order
Investing in broad emerging markets today involves trusting 50% of your assets to China and Taiwan. Beyond geopolitics, this kind of concentration raises important questions about risk, return, and diversification. Arjun Divecha, who founded GMO Emerging Markets Equity in 1993, has an alternative, innovative solution to this issue within traditional cap-weighted portfolios and benchmarks.
As much art as it is science, Arjun’s “New Normal” approach to determining country weights incorporates multiple dimensions of risk and opportunity, including demographics, predicted growth, macroeconomic risk, climate risk, geopolitical risk, domestic policy risk, and diversification.
With the goal of capturing the true long-term opportunity of emerging markets, the concept of his New Normal is neither index nor active portfolio in the traditional sense. Rather, it represents a new, better way of thinking about investing sensibly in emerging markets.
Ubiquitous China: Latest Views and Impacts of the Aspirant Superpower on EM Debt and Equity Markets
Members of the Systematic Equity and Emerging Country Debt teams discussed the “new” new era of China, its implications for investors, and the country’s path of influence on emerging market debt.
Emerging Markets: Quality, Growth, and Sustainability
Warren Chiang and Binu George introduced the next evolution of GMO’s Emerging Markets Select Equity Strategy, which focuses on finding high-quality companies that can take advantage of important growth trends in emerging markets and utilizes a climate change-oriented approach to ESG and sustainability integrated at the country, sector, and company selection levels.
The (Al)Mighty Dollar – Is It a Problem for Emerging Debt, or an Opportunity?
A consequence of rising rates, the recent strength of the U.S. dollar places stress on emerging countries through both direct and indirect channels. Emerging debt investors Victoria Courmes and Carl Ross unpack the risks and opportunities within emerging debt markets arising from the strength of the U.S. dollar.
ESG Integration in Emerging Debt Markets – The Challenges and the Rewards
The GMO Emerging Country Debt team has integrated ESG factors into both its sovereign and quasi-sovereign/corporate credit research and analysis processes. Members of the team explained how this incorporation has impacted our emerging debt portfolios and results.