aiCIO: Are Emerging Markets the Next Bubble?

Mar 22, 2011, 11:25 ET from aiCIO

NEW YORK, March 22, 2011 /PRNewswire/ -- The Spring issue of aiCIO, published today, asks if a heavy dose of skepticism might benefit pension plans, endowments, foundations and other institutional investors that continue to pour money into emerging markets.

Despite predictions that equity portfolio flows to emerging markets are set to reach $186 billion this year – more than double the annual average seen between 2005 and 2009 – a number of institutional investors and consultants are worried that these relatively small markets will be unable to handle accelerated inflows.

"There are concerns that the euphoria of emerging markets may be blinding investors from a critical examination of the potential issues within the asset class," comments aiCIO Senior Editor Paula Vasan, who co-wrote the story with Joe Flood and editor Kip McDaniel. She notes that "huge portfolio flows pose the risk of inflating the sector's valuations to the point of overheating."

Vasan also observes a recent "fundamental shift" in emerging market asset allocation, whereby institutional investors are less inclined to apportion their dollars to emerging markets as a whole.  Especially since the turmoil in Egypt, investors are more likely to assume a micro, "country-focused" view of risk and place greater emphasis on differentiating between countries.

"The more astute investors are looking at risk on a country-by-country basis, but many investors continue to view emerging markets as a monolithic high-return machine," comments McDaniel. "That perspective worked for a number of years, but will not hold true indefinitely."

Also in aiCIO:

  • Joe Flood's Can New York City's Most Celebrated Citizen Revolutionize Its Pension System?

About aiCIO

A quarterly online publication, aiCIO focuses on the 5,000 largest pools of capital in the world, across pension plans, sovereign wealth funds, endowments, foundations, insurance funds and other leading institutional investors. aiCIO is edited by Kip McDaniel.

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Asset International is a privately-held provider of information and technology to global pension funds, asset managers, financial advisers, banking service providers, and other financial institutions in the private and public sector. Its industry-leading brands include Strategic Insight, SIMFUND, PLANSPONSOR, PLANADVISER, aiCIO, Global Custodian, and The Trade. The company has offices in New York, Hong Kong, London and Stamford, CT. For additional information please contact Jason Cassidy at