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Emerging markets have long tested investor patience. After years of relative underperformance, a new chapter is unfolding in 2025.
With economies recovering and reforms taking hold, EM funds are beginning to deliver on the promise of long-term horizon and disciplined approach.
In the first quarter of 2025, the MSCI Emerging Markets IMI Index rose about 1.7%, outpacing many developed benchmarks. Year-to-date through early April, emerging equities gained 5.7%.
China’s technology rebound, driven by domestic stimulus and supportive policy measures, and Brazil’s commodity strength were the main catalysts.
Active strategies, such as the VanEck Emerging Markets Fund, matched or beat the index with a 1.97% return in Q1, underscoring the value of selective management.
Patient capital refers to money invested with a long-term lens, where short-term fluctuations are tolerated for the promise of substantial gains.
Pension funds, sovereign wealth entities, and endowments typify this approach, riding through volatility to capture structural growth drivers.
China led the resurgence on the back of tech-sector recoveries and targeted fiscal and monetary support, offsetting trade tensions.
Brazil’s market rally reflected better fiscal discipline, robust commodity prices, and optimistic investor sentiment toward reforms.
India experienced mixed returns, with demographic and digital tailwinds tempered by profit-taking and uneven economic data in Q1.
Emerging markets remain sensitive to global policy shifts. Proposed tariffs and trade barriers can trigger rapid sentiment changes.
Navigate volatility and macroeconomic policy shifts by avoiding short-term reactionary decisions.
Currency fluctuations and geopolitical conflicts can amplify headline risk, but seasoned investors view these as entry points for selective opportunities.
Embrace underappreciated and undervalued market opportunities by focusing on sectors benefiting from domestic consumption and resilient balance sheets.
High-quality active managers can unearth niche leaders that global benchmarks may overlook, rewarding those with staying power.
To harness the power of patient capital, start by setting a clearly defined investment time horizon aligned with your financial goals.
Partner with managers offering selective exposure to resilient businesses that can weather short-term shocks and benefit from long-term trends.
Maintain disciplined rebalancing and resist the urge to chase every market rally or flee on temporary dips.
By staying committed to a patient capital approach, investors will be poised to reap the substantial rewards that emerging markets can deliver over time.
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