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Deglobalization and the Benefits of Going Small in EM

The global pandemic has intensified the mega-trend of deglobalization. Governments around the world are shifting their focus from promoting exports to stimulating domestic demand creating localization winners and losers in an attempt to create more diversified (but perhaps less optimized) supply chains.

We believe Emerging Markets Small- and Mid-Cap companies are poised to benefit from what may prove to be a secular trend, given their ability to provide greater exposure to domestically oriented economies and sectors.

Given this backdrop, it’s not surprising that the MSCI Emerging Markets Small Cap Index is significantly outperforming the broader MSCI Emerging Markets Index year-to-date*.



*Data as of 09/30/2021.

The MSCI Emerging Markets Index captures large and mid cap representation across 27 Emerging Markets (EM) countries. With 1,407 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The MSCI Emerging Markets Small Cap Index includes small cap representation across 27 Emerging markets countries. With 1,821 constituents, the index covers approximately 14% of the free float-adjusted market capitalization in each country. The small cap segment tends to capture more local economic and sector characteristics relative to larger EM capitalization segments. One cannot invest directly in an index.