The origins of the term ‘Emerging Markets’, invented in 1981, are somewhat cringeworthy: Antoine van Agtmael, the World Bank Economist, who is credited with the coinage, wanted a term that sounded less despairing than ‘Third World’ (The man was trying to start a Third-World Equity Fund and found the door repeatedly getting slammed in his face as soon as he said the name of the intended fund to prospective investors), eventually settling for a more invigorating term: Emerging Markets.
That was in 1981; and 4 decades later, there is still no uniform standard in place for classifying a country as an Emerging Market. (MSCI classifies 26 countries as EMs; Russel, 19; and, the IMF, 23). The lack of a clear-cut definition is not without a reason: the space is fraught with uncertainty, lost decades are a reality and the capital markets are generally inefficient, making it easier for Index-owners to create broader definitions and even broader benchmarks. (And you thought only investors sought solace in Diversification). What the EM space lacked in uniform specifications and standards, was made up for with a torrent of monikers.
After the Goldman Sachs coinage of BRIC in 2001, a slew of monikers followed: BRICS, CIVET, MINT, MIST, EAGLEs and the very Enid Blyton-like Fragile Five. The underlying (flawed) narrative was always that with EMs an investor must seek strength from the pack.
While the star of H1 2023 – broken and on the ropes last year – is undoubtedly the NASDAQ 100 with a 40% YTD return, it’s equally incredible to see key EMs hold dollar-adjusted returns in the face of the fastest rate hikes from the US Fed in four decades.
Yeah, monikers happen in four decades and so do a lot of other things. Mostly nice things.
