Dragon Capital: Exposure to emerging markets is growing

Dragon Capital: Exposure to emerging markets is growing

Emerging Markets
Emerging Markets (03) EM Opkomende landen

Pension funds, insurers, family offices and wealth managers set to increase their exposure to emerging markets.

Almost nine in ten (87%) professional equity investors expect inflows into emerging market equities to increase over the next three years and nine in ten (90%) predict their fund allocation to emerging market equities will be overweight by the end of 2025. That concludes Dragon Capital concludes today from own research.

‘The study, carried out amongst global and emerging market equity investors at pension funds, family officers, insurance asset managers and wealth managers who collectively manage around $1.64 trillion AUM, reveals that around four in ten (39%) currently think that the fund they help to manage is underweight in emerging market equities – with a further quarter (23%) saying their allocation is balanced,’ the company said.

‘This is despite nine in ten (90%) admitting they have already increased their allocation to emerging market equities since the start of 2023. Of these, around a fifth (19%) say they’ve already made a dramatic increase.

This increase in exposure to emerging markets comes as almost all (98%) of professional equity investors think that growth in emerging and frontier markets will outpace that of developed markets over the next five years.

When asked to select their top three reasons as to why they think professional equity investors will increase their allocation to emerging and frontier market equities, 81% selected the view that these markets are currently undervalued, followed by the view that they have huge benefits to gain from the technological revolution – in many cases more so than developed markets (selected by 74% of those surveyed). The third most selected reason is that growing middle classes in emerging markets make them an attractive long-term investment (70%).’