WHY THE FUTURE OF INVESTING BELONGS TO EMERGING MARKETS
Compelling Reasons to Include Emerging Markets Exposure in Canadian Portfolios:
| 1. BETTER LONG-TERM PERFORMANCE |
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| 6. IMPROVING CREDIT QUALITY |
| Emerging markets have significantly outperformed developed markets over the 16-year period ending December 31, 2014. During this period, the MSCI Emerging Markets Index produced a total return of 188%, as compared to only 59% for the broader MSCI World Index. | Emerging nations have significantly improved their credit and market debt ratings, translating into ratings upgrades on their bonds. Over 60% of emerging market debt is currently rated investment grade. | |||
2. REDUCED PORTFOLIO VOLATILITY |
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| 7. LARGER INVESTABLE UNIVERSE |
| Canadian investors can lower overall portfolio volatility by adding low-correlation emerging markets exposure. | The market capitalization of emerging markets has expanded exponentially since 2000. By 2030, it is forecasted to reach US$123 trillion, up from $2 trillion in 2000. | |||
3. WORLD’S STRONGEST ECONOMIC GROWTH |
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| 8. LOWER DEBT LEVELS |
| The global economy is now driven by the emerging markets as they account for 73% of global growth, and are forecast to outpace developed markets for decades. | Emerging martket nations debt-to-GDP ratios have fallen dramatically since 2000. They currently average only 40%, as compared to 100% in developed markets. | |||
4. BENEFICIAL DEMOGRAPHICS AND GROWING MIDDLE-CLASS CONSUMPTION |
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| 9. HIGHER FOREIGN RESERVES |
| A younger demographic structure, with a rapidly growing middle class, is fueling domestic consumption and infrastructure development, contributing to accelerating economic growth. | Emerging markets hold 65% of total global foreign reserves, providing greater ability to stabilize exchange rates, reduce external market dependency, and moderate currency shocks. | |||
5. STRONGER CORPORATE FUNDAMENTALS |
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| 10. POLICY FLEXIBILITY |
| Emerging market companies are stronger and more globally competitive than they once were, with better quality balance sheets and increasing profitability. | Lower debt levels and higher foreign reserves provide emerging market nations with greater flexibility to implement policies to better target inflation, interest rates, and currency initiatives. |
