THE WisdomTree BLOG
Investing in emerging markets can have daunting levels of risk. Yet many investors continue putting their emerging markets allocation into one cap-weighted product, hoping it pays off without much damage. Instead, we suggest that our diversified emerging markets barbell approach has the potential to give investors the yield, volatility mitigation and returns they are looking for.
Through the first six months of the year, emerging markets have lagged most developed markets, despite entering the year poised for a rally and then falling during May’s sell-off. In light of this volatility, we believe a dividend-weighted approach to emerging market small-cap equities strikes an intriguing balance between return potential and volatility mitigation.
This was expected to be the year of the global economic slowdown. But the year-to-date synchronized rally in global equities has stolen the spotlight. So far, Chinese equities have been the star.
There is a chance that, come this autumn, many fund managers will have zero exposure to the eighth-largest country in the MSCI Emerging Markets Index. What country is it? Jeff Weniger discusses this emerging markets anomaly.
Jeremy J Siegel
Senior Investment Strategy Advisor
CEO of WisdomTree
Jeremy Schwartz, CFA
Executive Vice President, Global Head of Research
Christopher Gannatti, CFA
Head of Research, Europe
Christopher Gannatti began at WisdomTree as a Research Analyst in December 2010, working directly with Jeremy Schwartz, CFA®, Director of Research. In January of 2014, he was promoted to Associate Director of Research where he was responsible to lead different groups of analysts and strategists within the broader Research team at WisdomTree. In February of 2018, Christopher was promoted to Head of Research, Europe, where he will be based out of WisdomTree’s London office and will be responsible for the full WisdomTree research effort within the European market, as well as supporting the UCITs platform globally. Christopher came to WisdomTree from Lord Abbett, where he worked for four and a half years as a Regional Consultant. He received his MBA in Quantitative Finance, Accounting, and Economics from NYU’s Stern School of Business in 2010, and he received his bachelor’s degree from Colgate University in Economics in 2006. Christopher is a holder of the Chartered Financial Analyst designation.
Head of Fixed Income Strategy
Tripp Zimmerman, CFA
Head of Fixed Income & Currency
Associate Director, Asset Allocation and Modern Alpha
Head of Capital Markets
Associate Director of Capital Markets
Head of Europe
Joseph Tenaglia, CFA
Associate Director, Asset Allocation
Jianing Wu joined WisdomTree as a Research Analyst in October 2018. She is responsible for analyzing market trends and helping support WisdomTree’s research efforts. Previously, Jianing completed internships and projects at Geode Capital, Starwint Capital, and Invesco Great Wall Fund Management with a focus in quantitative research. Jianing received her M.S in Finance from the Massachusetts Institute of Technology. She graduated with honors from Boston College with degrees in Mathematics and Philosophy.
Jeff Weniger, CFA
Director, Asset Allocation
Alejandro Saltiel, CFA
Associate Director of Modern Alpha
Alejandro Saltiel joined WisdomTree as a Quantitative Research Analyst in May 2017. He is responsible for quantitative research on WisdomTree’s products and global equity markets. Prior to joining WisdomTree, Alejandro worked at HSBC Asset Management’s Mexico City office as Portfolio Manager for multi-asset mutual funds. He started his career working at a boutique hedge fund that specialized on trading options on sector-levered ETFs. Alejandro received his Master’s in Financial Engineering degree from Columbia University in 2017 and a Bachelor’s in Engineering degree from the Instituto Tecnológico Autónomo de México (ITAM) in 2010. He is a holder of the Chartered Financial Analyst designation.
Matt Wagner, CFA
Modern Alpha Analyst
Matt Wagner joined WisdomTree in May 2017 as a member of the Research team. He is responsible for research on WisdomTree’s products and communicating the firm’s views on the markets. Matt started his career at Morgan Stanley, working as an analyst in Treasury Capital Markets from 2015 to 2017 where he focused on unsecured funding planning, execution and risk management. Matt graduated from Boston College in 2015 with a B.A. in International Studies with a concentration in Economics. Matt is a holder of the Chartered Financial Analyst designation.
Investment Strategy Analyst
Brian Manby joined WisdomTree in October 2018 as an Investment Strategy Analyst. He is responsible for assisting in the creation and analysis of WisdomTree’s model portfolios, as well as helping support the firm’s research efforts. Prior to joining WisdomTree, he worked for FactSet Research Systems, Inc. as a Senior Consultant, where he assisted clients in the creation, maintenance and support of FactSet products in the investment management workflow. Brian received a B.A. as a dual major in Economics and Political Science from the University of Connecticut in 2016, and is pursuing the Chartered Financial Analyst designation.
Kara Marciscano, CFA
Quantitative Research Analyst
India’s parliament is currently about to close its winter session. Agenda items for the session included key bills such as the Goods and Services Tax (GST) Bill, which could simplify taxes and increase mobility of goods and services across the country; the introduction of a bankruptcy code to strengthen the banking system; and a few other key legislative items.
WisdomTree believes that weighting by market capitalization may not always be the best approach to indexing. Instead, we believe a disciplined strategy of anchoring allocations back to a measure of relative value, based on fundamentals such as dividends or earnings, can add value over time.
At WisdomTree, a critical way for us to identify valuation opportunities is through our annual Index rebalance. Our process is designed to evaluate the underlying fundamentals of Index constituents each year.
While the landscape implied by the global Dividend Stream® provides useful context for global importance and can help inform allocation ideas, here we will focus on emerging markets.
For the first three quarters of 2015, emerging market currencies have depreciated compared to the U.S. dollar—some much more significantly than others. At the worst end of the spectrum, the Brazilian real lost approximately one-third of its value measured against the U.S. dollar, and on the other end of the spectrum, the Chinese yuan—a currency often remarked upon for the lack of a market-determined exchange rate—even lost a few percentage points of its value against the dollar.