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Indirect EM exposure beats direct investments
19 July 2013
Russell indexes show European firms' higher returns
Targeted, indirect exposure to emerging markets can be a more efficient method to generate returns, Russell Investments has claimed.
The investment manager cited the performance of its Russell Emerging Markets Index, which has delivered a return of -5.9% year-to-date by mid-July. Russell said the blanket, direct approach left investors open to the negative impacts of growing political instability in various emerging market countries and stalling Chinese growth.
In contrast, the Russell Developed Europe Large Cap EM Geographic Exposure Index, which tracks European companies with significant exposure to targeted emerging markets, returned 4.1% over the same period.
Tom Goodwin, senior research director with Russell Indexes, said: “With increasing globalisation, European companies will continue to operate across several different regions and countries as they seek to benefit from economic growth in regions outside their home countries.
“Geographic exposure provides a new way to disentangle the country and regional exposures of multinational companies, by providing a new set of tools for multi-asset portfolio analysis, benchmarking and asset allocation.”