An increasing number of pension funds in emerging markets are foregoing global equities in favour of emerging market equities, according to a new report from Global Pensions.
“We hear from emerging markets investors a lot. Whereas five years ago, they would have said to us, ‘OK, we’re looking to diversify. We’re going to be buying global equities,’ now they’re saying, ‘Well, why would we do that? I want to invest in other emerging markets’,” says Nick Lyster, European chief executive at Principal Global Investors.
This choice reflects a broader interest among institutional investors around the world in emerging market assets. Lyster said interest from investors in the west will continue to drive flows, despite the fact they typically underweight emerging markets to a mere 5% to 10% of assets.
“I think that emerging market equities and emerging market debt are still going to be of great interest,” he told the magazine. “There is an argument that maybe they’ve had a very good run, maybe they’re overpriced, but we believe this is a long-term, sustainable move.”