Emerging market equities offer a wide variety of exciting investment opportunities, but many of these are often overshadowed by the dominance of China both in terms of index weight and investors’ mindshare. We believe an ex-China strategy could be a valuable addition to investor portfolios for a number of reasons. The benefits include a potentially more attractive performance profile, greater diversification benefits, and the ability to focus on some of the more exciting companies, countries, and themes in emerging markets for benchmark-aware strategies.
China stocks dominate the EM index
Historically, China has been a performance headwind and a geopolitical risk driver. Over the trailing three- and five-year periods, the MSCI China Index has seen negative absolute returns, weighing on results for the MSCI Emerging Market Index. We also believe ongoing tensions both within China and on the global stage could continue to cause concern among investors and serve as an overhang on Chinese stocks.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
