India

Africa

Emerging Markets

A New Approach

VIKASA challenges the traditional notion of the emerging markets, the BRIC’S view no longer provides maximum value. A new and comprehensive strategy must be embraced to unlock their potential. Emerging markets are often highly regulated and thus access can be restricted. VIKASA’s platforms allow direct access to these alpha driven markets. Our team is dedicated to emerging markets.

Previous conceptions of Emerging Markets have become dependant on the BRICS approach, which highlights 5 Emerging Markets: Brasil, Russia, India, China and South Africa. VIKASA Capital understands this is an antiquated notion and is no longer a viable investment strategy. The allocations of BRICS’s portfolios have become so confused that they cloud the asset class. Emerging Markets funds that concentrate their investment into these countries have become too China-centric, and loose Alpha. The volatility of these markets skews alpha generated by the newer Emerging Markets. With new international tensions brewing with Russia and uncertain economic reforms in China, a new view of Emerging Markets is required.

A new breed has taken shape. The next generation of Emerging Markets has proven themselves on the world stage. Countries like Turkey and Indonesia have built impressive economic foundations that have created tremendous economic growth. New tigers in Asia, such as Vietnam and Cambodia, have huge growth potential. This new generation of emerging markets are an under-allocated source of Alpha. But the real engine of the asset class is India. India stands poised for growth as the ideal investment destination outside the United States.

Responsible portfolio construction demands a re-calibration. The world economy has changed. New markets are impacting the world and we need new models. VIKASA Capital believes in seeking alpha from this new generation of Emerging Markets. While the BRICS still remain important in the world economy, we must also make allocations for a new generation of Emerging Markets.

``The world is changing. Emerging markets have become the new engine of global growth.``

What are Emerging Markets

The term emerging markets was first used by the International Finance Corporation (IFC) in 1981, to promote the mutual fund investments in developing countries. Their definition included countries that constitute approximately 80% of the global population, and represent about 20% of the world’s economies. As an emerging market, a country is embarking on an economic transformation program that will eventually lead to stronger and more sustainable economic performance levels, transparency and efficiency in the capital market.

 

Many have pointed to Brazil, Russia, India, China, and South Africa (BRICS) as the basis of the Emerging Markets. These markets have grown extensively in the world marketplace and now constitute a huge percentage of world GDP.

 

A further examination of Emerging Markets shows: new markets opening to global capital, technology, coupled with a changing socio-economic fabric. As a result, the GDP growth rates of these countries have dramatically outpaced those of more developed economies, lifting millions out of poverty and creating new middle classes–and vast new markets for consumer products and services. With lower labor costs and new generations of an educated citizenry, these markets are poised for substantive economic transformation.

 

The world is changing. Emerging markets have become the new engine of global growth. These developing economies are expected to grow to three times faster than developed nations like US, according to the International Monetary Fund (IMF). The features that shore up the attractiveness of emerging markets are still attractive and entices investors for their long term benefits. Portfolios must provide for a new model of asset allocation.

Emerging market chart

  • Emerging markets have a rapidly expanding middle-class who is eager to enjoy a higher standard of living and eventually ready to consume a wide range of goods and services.

  • Growth in Emerging markets remains high compared to developed markets counterparts

  • There is a growing but steady improvement in regulations and corporate governance in Emerging markets thus making these markets more transparent and competitive

  • The debt levels are low compared to developed countries such as the US, Japan and UK. The consumer credit penetration is very low compared to developed countries.