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Chapter 1. A brief history of Emerging Markets

Why investors cannot afford to ignore Emerging Markets

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The origins of the term

In the early 1980s, the International Finance Corporation (IFC) began tracking the performance of several local stock markets, including Argentina, Brazil, Chile, Greece, India, Jordan, Korea, Mexico, Thailand, and Zimbabwe. Surprised at the positive results, the IFC realised there was a strong case for encouraging foreign investment into these countries among others, and proposed the creation of a ‘Third World Equity Fund’.

Whereas ‘Third World’ suggested poverty and despair, ‘Emerging Markets’ instead “suggested progress, uplift and dynamism”


However, the name of the fund raised concerns, as it was considered both disparaging for the countries concerned and distasteful for potential investors. The IFC’s Antoine Van Agtmael came up with a more positive and aspirational description. Whereas ‘Third World’ was a label that suggested poverty and despair, Van Agtmael believed that Emerging Markets instead “suggested progress, uplift and dynamism”.

The challenge of definition

Finding a clear-cut, consensual definition of the term Emerging Markets can be difficult.

For many years the ‘emerging’ status of a country was determined only by its level of wealth (under a certain threshold), as measured by Gross National Income (GNI) per capita. However, given the pace at which Emerging Market economies have been growing, and the increasing number and variety of countries classified within this segment, an expansion of criteria was needed.

A more accurate way to define an Emerging Market country is a country which has not yet reached the level of development and stability of a Developed Market country.

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Did you know?

Although China has one of the world’s largest populations (with 1.4 billion citizens1) and the world’s second-largest economy, it is still considered to be an Emerging Market.


Avant-garde investors, believers in long-term rewards

You may be familiar with the simple adage: “with growth comes risk”. Risk explains why some investors have been reluctant to participate in Emerging Markets. While the growth potential is attractive, for many, the associated economic, political and financial risks are too great.

At Carmignac, we have been navigating the emerging world since 1989. Since those early years, it has remained one of our core investment themes. In an investment universe of considerable complexity and interconnectivity, we have gained extensive knowledge and improved our understanding, while developing a range of Emerging Market funds2 designed to meet the different needs of investors.

  • Did you know?

    China’s economy began to open up to capitalism in 1989. At Carmignac, we were quick to seize the investment potential. In 1989, more than 50% of the net assets of our global equity flagship fund was invested in Emerging Market countries, and more than 10% was invested in China3 .


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1Source: IMF database, 2020 data.
2Large and mid-cap equities: Carmignac Emergents (FCP), Carmignac Portfolio Emergents (SICAV), FP Carmignac Emerging Markets (OEIC). Small and mid-cap equities: Carmignac Portfolio Emerging Discovery (SICAV), FP Carmignac Emerging Discovery (OEIC). Large and mid-cap equities, bonds and currencies: Carmignac Portfolio Emerging Patrimoine (SICAV), FP Carmignac Emerging Patrimoine (OEIC).
3Carmignac Investissement as at 31/03/1989.