Capital Generation Partners have released a report called ‘The truth about investing in emerging markets’, which reveals that 10 year portfolios invested in emerging markets outperformed developed markets just 27% of the time in the last 20 years.
The report showed that emerging market equities did not outperform either on a total return or a risk-adjusted basis.
It added that the frequency of outperformance lessens for portfolios that invest for the long term.
Over a three-year time period, emerging markets outperformed developed markets 62% of the time, compared to only 27% over a 10-year period.
Ian Barnard, founding partner of Capital Generation Partners, said: "There is a common misconception that exposure to emerging market equities will deliver outperformance. For many this is based on the fundamental assumption that GDP growth is an indicatorof future stock market returns.
"This research demonstrates that not onlyis this assumption incorrect, but that outperformance has been limited to date, particularly among longer-term investors. There are several reasons for this misalignment of expectations versus reality, not leastthe complexities of emerging markets as a whole."
The researched was compiled by comparing the MSCI Emerging Total Return Gross Index versus the MSCI World Total Return Gross Index, which tracks the developed world.
Capital Generation Partners said it still believed emerging markets have a place in a diversified portfolio and said investors should not discount them completely, as long as they have realistic views of what they can get out of them.
