Emerging Markets: A 20-year Perspective

Written by Remy Briand and Madhusudan Subramanian

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” — Adam Smith

Introduction

In the late ’80s, a small group of institutional investors started to look beyond traditional equity markets to invest in emerging markets. These early investors had a very simple, yet powerful rationale for investing in these markets. They postulated that they would benefit from rapid economic growth if they invested in markets that were at an early stage of development and had considerable potential for further development. They anticipated that developing countries would progressively adopt market-oriented policies in a globalizing world and that they could invest in companies at low valuation, as these markets were under-researched and undiscovered.

Indeed, the last 20 years have seen a continuously expanding universe due to the opening of previously closed markets or markets reaching sufficient size and liquidity to become investable.

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