EXECUTIVE SUMMARY

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 a more constructive position on emerging markets. Our perspective is anchored in three 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.
   
• Macro Tailwinds: Declining inflation and the current interest-rate-cutting cycle are set to reduce demand for the US dollar. Coupled with a resilient global economy, emerging markets equities are poised to benefit from these tailwinds.