Emerging Markets

“If you’re well-diversified, you can’t have everything going up all at once.” Christopher Cordaro, CIO at RegentAtlantic Capital, LLC.

In this article by Michael Shagrin, Mr. Cordaro is quoted about the under-performance of the Emerging Markets (EM) asset class – an asset class consisting of countries such as China, Brazil, Russia, and India, just to name a few.

Just as many investors choose to lessen their positions in under-performing investment asset classes, a number of investors propose the same portfolio changes for the Emerging Markets asset class; however, just as Christopher and numerous others, The Trust Company believes EM investments are still prudent on a long-term horizon for clients. As this chart shows, EM countries make-up more than half of the world’s gross domestic product (GDP) – the value of all finished goods and services produced within a country’s borders within a certain time period (J.P. Morgan Asset Management, 6/30/2013). Because of this number, The Trust Company still feels EM assets are not only sound investments but also still have a large amount of growth in their future.

Additionally, as Earth’s population continues to increase, the combined purchasing power of the global middle classes is estimated to more than double by 2030 to $56 trillion; over 80% of this demand will come from Asia [and other Emerging Markets] (Ernst & Young).

Finally, we at The Trust Company readily acknowledge that EM countries and investments can be relatively volatile in the short-term; therefore, our recommended all-equity portfolio only holds a ten percent allocation to EM assets –a small, yet relevant, piece of the overall portfolio.