Over the last two decades, we believe the twin forces of globalization and emerging markets reforms have produced one of the most transformative periods of wealth creation and upward income migration in human history – lifting hundreds of millions from poverty to low income, low income to middle income, and middle income to high income. The emerging markets account for over 50% of global GDP, while the middle income population of the emerging markets has expanded from 1.4 billion to 2.6 billion. In this transformation, the emerging markets have evolved from too small to matter to too big to ignore.
Growth, development, and rising income migration are the three pillars to EM investing. But these are not guaranteed linear outcomes – they are the outcomes of sound macroeconomic policies, innovation and investment, rule of law, and political stability. Without these inputs, the outcomes are more volatile, variable, and widely distributed.
In this next phase, the emerging markets face significant challenges – cyclical and structural. Global investors may not be adequately prepared for the challenges ahead. Key themes for this next phase of the emerging markets: middle income trap; structural reforms; widely differentiated outcomes with big winners; big losers; overweight alpha, not beta.
ICE CANYON: An experienced leader in global investing.