A strong global economy, led by several emerging economies, continue to provide valuable investment opportunities for alternative managers. This global rising tide continues to reward all market participants, making it difficult for asset managers to stand out in a crowded field.
It follows there is increased interest in emerging markets as investors look for return and yield above their benchmarks and these economies demonstrate strong economic performance. The MSCI emerging markets index is up 49% since 20161, compared to a 29% gain in the S&P 500 during the same timeframe2 and the weighting of emerging markets in the MSCI all-country world index is up to 11% as of May 2016, compared to 7% in 20063 as the threshold for investable assets is reached by more companies in these markets.
This corresponds with increased investment in emerging markets from alternative asset managers. Recent data from Preqin show hedge funds increased their investment in emerging markets by 6% year over year from 2016 to 2017. While the rate might not yet seem substantial, the long lead times associated with entering emerging markets indicate the trend may soon pick up steam.