By Matteo Anelli, Deputy editor, Trustnet, 07 October 2025:
Experts discuss how to invest in the emerging world.
Emerging markets add growth and diversification to portfolios and are trading cheaply against developed markets.
They are also more volatile and less liquid, but not necessarily riskier if risk is understood in terms of a permanent loss of capital rather than higher volatility, according to Matthew Read, senior analyst at QuotedData.
Funds, trusts or trackers?
Read, Makin and Stevenson agreed that the closed-ended structure of investment trusts is advantageous for emerging-market investing.
Liquidity is less of a concern for trust managers, who aren’t forced to sell assets to meet redemptions. This way, “the strategy can take a truly long-term view,” said Makin, which is “important in emerging markets, where investor sentiment can change quickly”.
There are also other advantages that trusts have over funds (that goes beyond emerging markets), including better access to unquoted companies and frontier markets, the ability to short companies, which is difficult to do in an open-ended fund, and the ability to take on debt, as well as the discount mechanism..
In most instances, there is “a strong case” for building one’s emerging markets exposure around one or two broader emerging markets funds, said Read. But, for those with room in their portfolio, allocations to a broad frontier markets fund or some individual markets such as China, India, or Vietnam, “could also make sense”.
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