Rethinking Benchmarking and Alpha in Emerging Markets

Why investors may need to look beyond benchmark weights to unlock the full opportunity set in emerging markets.

Emerging markets have evolved dramatically over the past two decades, yet many investors continue to approach the asset class through increasingly concentrated benchmark frameworks. As index composition has become more concentrated by country, sector and company, the question is no longer whether investors should allocate to emerging markets, but whether traditional benchmarks remain the most effective way to access the opportunity.

In this paper, we examine how benchmark concentration, capital flows and market inefficiencies can influence investment outcomes and why a benchmark-aware – but not benchmark-constrained – approach may offer a broader opportunity set for active investors.