PIMCO explores how investors can rethink emerging market allocations using a more granular, multi asset framework rather than relying on traditional benchmarks. The paper argues that broad EM exposure masks significant dispersion, with cross country differences often exceeding 10% annually, challenging the idea that EM is a single asset class.
Emerging and Developed Markets: So the Last Shall Be First
PIMCO
Jamil Baz
Research
22 Pages
Key Takeaways
Dispersion Drives Returns: Country level return spreads within EM equities exceeded 15% annually, suggesting active allocation across regions may matter more than asset class selection alone.
Correlation Misconceptions Persist: EM asset classes show intra class correlations above 0.70, limiting diversification benefits unless investors shift toward country specific or factor based allocations.
Dynamic Allocation Benefits: A risk based allocation approach improved Sharpe ratios by roughly 25% versus static benchmarks, highlighting the potential value of active rebalancing across EM segments.
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