Strategic Allocation to Emerging Markets

UBS argues that a regime shift toward higher interest rates and valuation dispersion makes Emerging Markets a critical strategic allocation for institutional investors who are currently underweight.

Key Takeaways

• 1.The global economy is entering a new regime of valuation dispersion and volatile stock-bond correlations, necessitating a shift away from US-centric portfolios toward emerging markets.
• 2.Emerging market assets have shown increased resilience to geopolitical shocks and offer strong risk-adjusted returns due to improved policy credibility and fiscal frameworks.
• 3.Institutional portfolios remain structurally underweight in EM assets, with typical allocations at 5% for equities and 1-3% for debt, well below benchmark weights.

Table of Contents

• EMs: Strong macro fundamentals, balanced policy mix
• Asset class evolution – EM debt
• Asset class evolution – EM equities
• EM asset classes outlook
• EM underweight in institutional portfolios
• Summary

Document Preview

Page 1 of 5

Subscribe for full accessStart Free Trial