Skip to main content
PGIM LogoPGIM Logo
  • Inhalt auf Englisch

    • Megatrends
    • Jahresbericht „Beste Ideen“
    • OutFront Serie
    • Portfolioforschung
    • Der Quartalsausblick
    • Marktgeschehen
    • Thought Leadership
    • Veranstaltungen & Webinare
    • Videobibliothek
    • Podcasts
    • Investments und ESG
    • In Alternativen investieren
    • Investitionen an Schwellenmärkten
    • Mit Risiken umgehen
  • Alternativen

    • PGIM Private Alternatives
    • PGIM Private Capital
    • PGIM Real Estate
    • Montana Capital Partners (PE)

    Aktien und Anleihen

    • PGIM Fixed Income
    • Jennison Associates

    Beratung

    • PGIM Multi-Asset Solutions
    • PGIM Quantitative Solutions

    ZWISCHENVERTRIEB

    • PGIM Investments
  • Inhalt auf Englisch

    • Kunden, für die wir arbeiten
    • Institutionelle Beziehungen
    • Globale Standorte
    • Kontakt
  • Inhalt auf Englisch

    • Überblick
    • Kompetenz
    • Geschichte
    • Integration & Diversität
    • Globale Standorte
    • Kontakt
    • Newsletter-Anmeldung
    • Informationen anfordern
  • Inhalt auf Englisch

    • Karriere bei PGIM
    • Stellenangebote
    • Newsroom
    • Pressemeldungen
    • In den Nachrichten
    • Zahlen & Fakten
    • Ansprechpartner für Journalisten
Annual Best Ideas

Uncovering Opportunities Across Emerging MarketsUncoveringOpportunitiesAcrossEmergingMarkets

16. Jan. 2025

  • Download PDF
Teilen
  • Mail
  • LinkedIn
  • Twitter
  • Copy URL
  • Print

Teilen

Investors have historically favored emerging markets for their high growth potential, relative inefficiency, and diversification benefits due to their low correlations with developed markets. While timing asset class allocations is notoriously difficult, we believe now is a good entry point for long-term investors to consider increasing their active allocations to emerging markets. 

Our current view of emerging markets is anchored in the following key pillars: 

  • Historic valuation dispersion: Emerging markets have consistently traded at a discount to developed markets; however, the historical valuation differential is now at its widest level since the dot-com bubble. 
  • Future growth expectations: Buoyed by favorable demographics and a growing middle class, emerging markets’ contribution to global economic growth will continue to rise. Improvements in corporate governance will help translate GDP growth into corporate earnings growth. 
  • Mispricing opportunities: Given their more complex market dynamics and inefficiencies, emerging markets present active investors the potential to uncover significant value to help reach their investment goals. 

Historic Valuation Dispersion        

During the nearly 40-year period starting in 1987, the performance differential between emerging and developed markets has occurred in long, multi-year cycles (Figure 1). Since that time, there have been four super cycles of performance differential, with the average duration lasting about nine years. The current cycle of underperformance for emerging markets has lasted 13 years, notably longer than the historical average, as seen below.

Figure 1: Performance Differential Super Cycles: Emerging Markets vs. Developed Markets

Relative Performance Between EM and US Equity Market

Source: FactSet as of July 31, 2024.

Playing the mean reversion game is challenging, however, as cycles often persist longer than anticipated. In conjunction with mean reversion, we also consider historical relative valuations to understand when the mispricing is at its widest. Figure 2 illustrates the valuation spread between emerging and developed markets over time. Notably, the Y-axis shows that while emerging markets have consistently traded at a valuation discount to developed markets over the past 25 years, this discount is currently approaching one standard deviation, a level not seen since the dot-com era.

Figure 2: Emerging Market Relative Valuations at Consistent Historical Discount

Difference of Forward 12-Month P/E Between EM and DM

Source: FactSet as of July 31, 2024.

To provide further context around the potential value opportunity in emerging markets, we analyzed the normalized valuation spread relative to the forward five-year return differential since 1999. When the normalized value spread is less than -0.5, the forward five-year return of emerging compared to developed markets is 12%. As of July 24, 2024, the spread was -0.5, suggesting a favorable time to lean in to emerging markets based on valuation.

Future Growth Expectations 

Emerging markets have historically outpaced developed markets in real GDP growth, a trend we believe will continue and likely strengthen. These countries have larger working-age populations (15-64) compared to developed nations, a gap the IMF projects will only widen. This demographic advantage, coupled with robust GDP growth, is fueling the rise of an expanding middle class poised to become the global consumers of tomorrow. Additionally, meaningfully lower debt-to-GDP ratios of many emerging market countries translate to healthier national balance sheets than seen in their developed counterparts. Given these tailwinds, why have emerging markets trailed developed over the past decade? 

Despite historically higher GDP growth, corporate earnings growth in emerging markets has lagged. For most of the last 12 years, year-over-year corporate earnings growth in emerging markets has consistently trailed that of the US, driven in large part by weaker corporate governance, poor capital discipline, and deficient shareholder protections. However, the earnings drought in emerging markets appears to have bottomed out, with company fundamentals beginning to strengthen. This turnaround can be attributed to recent improvements in corporate governance and financial reforms that focus on greater capital discipline, enhanced shareholder value, investor protections, and information disclosure and transparency.

Opportunities for Active Managers

In general, passive mandates have performed extremely well over the last 20 years net of fees. However, emerging markets may be an area ripe for active investors to find value not readily available in the developed world given the more complex market dynamics, unique risks, and rich mispricing opportunities.

Emerging markets have unique properties that make them more inefficient than developed markets. It starts with lower global investor attention, leading to fewer analyst opinions and greater mispricing. Unlike in developed, liquid markets, this mispricing is not arbitraged away as rapidly. Limited attention stems from the fact that emerging market companies have historically offered lower transparency, limited disclosures, and less favorable shareholder protections. Furthermore, information in these markets tends to be less uniform and reliable, making the process of collecting, cleaning and interpreting the data particularly important – yet challenging – which can deter many investors. 

Given these limitations, one might expect a smaller opportunity set of high-quality companies to invest in. However, there are more than 3,400 investible stocks across 11 sectors and 24 developing countries. This diverse universe, combined with less reliable information, underscores the importance of risk management and creates compelling opportunities for active investors. This is borne out in the data; over the past decade, cross-sectional stock return dispersion across the US, EAFE, and EM shows that not only is the average return dispersion higher in emerging markets, but the range of outcomes significantly outpaces developed markets as well.

Emerging market active managers have consistently demonstrated their expertise by leveraging informational advantages, mitigating higher transaction costs, and navigating the pronounced sector concentration risk within emerging markets. Quantitative managers in these markets hold an additional edge given their historical focus on risk management, construction of well-diversified portfolios that incorporate transactions costs in decision-making, and ability to successfully evaluate thousands of stocks simultaneously. For allocators considering increased exposure to emerging markets, active management offers a dual advantage – it can enhance returns while effectively managing risks.

Visit Website
PGIM Quantitative Solutions

Innovative multi-factor solutions to complex investment problems since 1975.

Visit Website

Erfahren Sie mehr
Alpha Opportunities Beyond the Macro Volatility

PGIM’s Best Ideas highlight a host of areas where we believe investors will find promising opportunities.

Erfahren Sie mehr

Not All AAA CLO ETFs Are Created Equal
Annual Best Ideas

Not All AAA CLO ETFs Are Created Equal

16. Jan. 2025

Not all AAA CLO ETFs are created equally, potentially leading to a wide dispersion in performance—especially during a down-market cycle.

Compelling Opportunities in Industrial Markets on the U.S./Mexico Border
Annual Best Ideas

Compelling Opportunities in Industrial Markets on the U.S./Mexico Border

16. Jan. 2025

The growth in border industrial demand is occurring alongside heightened uncertainty about U.S. trade policy that is unlikely to fade soon.

Enhancing Diversification Through Non-Sponsored Direct Lending
Annual Best Ideas

Enhancing Diversification Through Non-Sponsored Direct Lending

16. Jan. 2025

A diversified portfolio of sponsored and non-sponsored loans can provide investors with a broader range of deals and potentially better performance over time.

Unlocking Liquidity: The Distribution Edge of Lower Mid-market Private Equity
Annual Best Ideas

Unlocking Liquidity: The Distribution Edge of Lower Mid-market Private Equity

16. Jan. 2025

The era of private equity flourishing under low interest rates, followed by a blend of optimism after the COVID-19 pandemic, has shifted.

Artificial Intelligence: An Accelerating Revolution
Annual Best Ideas

Artificial Intelligence: An Accelerating Revolution

16. Jan. 2025

Today, the revolutionary impact of AI-driven change is becoming evident in most industries and is accelerating.

Navigating the Nexus: The Intersection of Insurance and Private Markets
Annual Best Ideas

Navigating the Nexus: The Intersection of Insurance and Private Markets

16. Jan. 2025

The maturation of private markets has led to profound change across the global investment landscape.

Rethinking ‘Safe’ Withdrawal Rates
Annual Best Ideas

Rethinking ‘Safe’ Withdrawal Rates

16. Jan. 2025

Perspectives on portfolio withdrawal rates by integrating spending flexibility and an outcomes metric that better captures the anticipated retiree sentiment.

Important Information

For Professional Investors Only. Past performance and forecasts are no guarantees or reliable indicators of future results. All investments involve risk, including the possible loss of capital. Diversification does not assure a profit or protect against loss in declining markets. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

These materials are for informational or educational purposes only. This information is not intended as investment advice and is not a recommendation about managing or investing assets or an offer or solicitation in respect of any products or services to any persons prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. In providing these materials, PGIM is not acting as your fiduciary. These materials represent the views, opinions and recommendations of the author(s) regarding the economic conditions, asset classes, securities, issuers or financial instruments referenced herein. Certain information has been obtained from sources that PGIM believes to be reliable as of the date presented; however, PGIM cannot guarantee the accuracy of such information, assure its completeness, or warrant that it will not change. This information, including projections and forecasts, is current as of the date of issuance (or an earlier referenced date) and is subject to change without notice. PGIM has no obligation to update such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy or accept responsibility for errors. PGIM and its affiliates may develop and publish research that is independent of, and different than, the recommendations contained herein.

The investments and returns discussed herein do not represent any PGIM product. This material is not intended to be used as a general guide to investing or as a source of any specific investment recommendations. Distribution of this information to any person other than the person to whom it was originally delivered is unauthorized, and any reproduction of these materials, in whole or in part, or the divulgence of any of the contents hereof, without prior consent of PGIM is prohibited.

Collapse section
  • Insights

    • Megatrends
    • Die besten Ideen des Jahres
    • Der Quartalsausblick
    • Marktgeschehen
    • Thought Leadership
    • Veranstaltungen & Webinare
  • Investmentthemen

    • Investments und ESG
    • In Alternativen investieren
    • Investitionen an Schwellenmärk
  • Kunden

    • Kunden, für die wir arbeiten
    • Institutionelle Beziehungen
  • Über uns

    • Überblick
    • Kompetenz
    • Geschichte
    • Integration & Diversität
    • Globale Standorte
    • Kontakt
    • Newsletter-Anmeldung
    • Informationen anfordern
  • Karriere

    • Karriere bei PGIM
  • Neuigkeiten

    • Aktuelle Neuigkeiten
    • Pressemitteilungen
    • In den Nachrichten
    • Zahlen und Fakten
    • Medienkontakte
PGIM Logo
  • Allgemeine Geschäftsbedingungen
  • Datenschutzzentrum
  • Barrierefreiheit Hilfe (Auf Englisch)
  • Cookie-Einstellungen

Ausschließlich für professionelle Investoren bestimmt. Alle Investments bergen Risiken, darunter auch das Risiko des Kapitalverlusts.

Dieses Material dient ausschließlich der Information und darf nicht als Anlageberatung oder als Angebot oder Aufforderung zum Erwerb in Bezug auf Produkte oder Dienstleistungen für Personen verstanden werden, denen es gemäß den Gesetzen, die für das Land ihrer Staatsbürgerschaft, ihres Wohnsitzes oder ihres Aufenthaltsortes gelten, untersagt ist, solche Informationen zu entgegenzunehmen. PGIM ist die wichtigste Vermögensverwaltungsgesellschaft von Prudential Financial, Inc. und ein Handelsname von PGIM, Inc. und den weltweiten Tochtergesellschaften des Unternehmens. PGIM, Inc. ist ein bei der U.S. Securities and Exchange Commission („SEC“) registrierter Anlageberater. Die Registrierung bei der SEC setzt keine bestimmte Befähigung oder Ausbildung voraus.

Die Informationen auf dieser Website sind nicht als Anlageberatung gedacht und stellen keine Empfehlung zur Verwaltung oder Anlage Ihrer Altersvorsorge dar. Durch die Bereitstellung der Informationen auf dieser Website handeln PGIM, Inc. und ihre Tochtergesellschaften nicht als Ihr Treuhänder.

Im Vereinigten Königreich werden Informationen von PGIM Limited bereitgestellt, mit eingetragenem Firmensitz: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR. PGIM Limited ist von der britischen Finanzdienstleistungsaufsichtsbehörde (Financial Conduct Authority – FCA) zugelassen und wird von dieser reguliert (FRN 193418). Im Europäischen Wirtschaftsraum („EWR“) werden Informationen von PGIM Netherlands B.V. bereitgestellt, eingetragener Firmensitz: Gustav Mahlerlaan 1212, 1081 LA Amsterdam, Die Niederlande. PGIM Netherlands B.V. ist von der niederländischen Finanzmarktaufsicht (Autoriteit Financiële Markten, „AFM“) in den Niederlanden unter der Registrierungsnummer 15003620 zugelassen und ist auf der Grundlage eines europäischen Passes tätig. In bestimmten EWR-Ländern werden Informationen von PGIM Limited, soweit die zulässig ist, unter Berufung auf Bestimmungen, Ausnahmen oder Lizenzen präsentiert, die PGIM Limited im Rahmen von zeitlich begrenzten Zulässigkeitsregelungen nach dem Austritt des Vereinigten Königreichs aus der Europäischen Union zur Verfügung stehen. Diese Materialien werden von PGIM Limited und/oder PGIM Netherlands B.V. an Personen ausgegeben, die professionelle Kunden im Sinne der Regeln der FCA sind und/oder an Personen, die professionelle Kunden im Sinne der jeweiligen lokalen Gesetzgebung zur Umsetzung der Richtlinie 2014/65/EU (MiFID II) sind. 

In Italien werden Informationen von PGIM Limited, die von der Commissione Nazionale per le Società e la Borsa (CONSOB) für die Geschäftstätigkeit in Italien zugelassen wurde.

In Japan werden die Informationen durch die PGIM Japan Co., Ltd. („PGIM Japan“) und/oder PGIM Real Estate (Japan) Ltd. („PGIMREJ“) bereitgestellt. PGIM Japan, ein bei der japanischen Behörde für Finanzdienstleistungen (Financial Services Agency) registrierter Finanzwertpapierdienstleister (Financial Instruments Business Operator), bietet verschiedene Anlageverwaltungsleistungen in Japan an. PGIMREJ ist ein japanischer Immobilienverwalter, der beim örtlichen Finanzamt von Kanto in Japan registriert ist.

In Hongkong werden die Informationen von PGIM (Hong Kong) Limited bereitgestellt, einem von der Börsenaufsicht in Hongkong regulierten Unternehmen. Die Bereitstellung erfolgt an professionelle Investoren im Sinne von Section 1 Part 1 von Schedule 1 der Securities and Futures Ordinance (Cap.571). In Singapur werden die Informationen durch PGIM (Singapore) Pte. Ltd. herausgegeben, einem von der Finanzaufsicht von Singapur (Monetary Authority of Singapore) unter einer Kapitalmarktdienstleistungslizenz zur Fondsverwaltung regulierten Unternehmen und ein sogenannter Exempt Financial Adviser. Dieses Material wird von PGIM Singapore als allgemeines Informationsangebot für „institutionelle Investoren“ gemäß Section 304 Securities and Futures Act 2001 of Singapore (SFA) und für „akkreditierte Investoren“ und andere relevante Personen gemäß den Bedingungen aus Section 305 SFA bereitgestellt. In Südkorea werden die Informationen von PGIM, Inc. bereitgestellt. PGIM Inc. verfügt über die notwendige Zulassung, Dienstleistungen im Rahmen der diskretionären Anlageverwaltung grenzüberschreitend direkt an qualifizierte institutionelle südkoreanische Investoren zu erbringen.

Prudential Financial, Inc. („PFI“) aus den USA gehört weder zum Unternehmensverbund Prudential plc., der seinen Hauptsitz im Vereinigten Königreich hat, noch zum Unternehmensverbund Prudential Assurance Company, einer Tochtergesellschaft von M&G plc. mit Hauptsitz im Vereinigten Königreich. 

PGIM, das PGIM-Logo und das Rock-Design sind in zahlreichen Ländern weltweit eingetragene Dienstleistungsmarken von PFI und ihren verbundenen Unternehmen. 

© 2022 PFI und zugehörige Unternehmen.

You are viewing this page in preview mode.

Edit Page