Emerging markets (EM) offer investors access to some of the world’s most dynamic, and increasingly important, economies and companies. With robust economic growth, improving fundamentals and a supportive demographic tailwind, we believe their future is full of potential.
These trends can create compelling opportunities across both emerging market equities - where companies can harness long-term growth drivers - and emerging market debt, which is benefiting from improved credit quality, stronger policy frameworks and attractive yield potential. Together, they provide diversified sources of return beyond traditional markets that can be valuable for investors' portfolios.
By staying active and thinking long-term, we seek to uncover tomorrow’s winners today. With discipline and insight, we navigate this vast and evolving universe to find the opportunities shaping the next investment chapter.
Why emerging markets now?
Dynamic
EM have come to the fore at a time of massive societal and economic change. Their relative economic youth and adaptability have allowed them to leapfrog developed markets (DM) to become leaders in areas such as technology and energy transition. Investing in EM allows investors to tap into a dynamic market which is leading the charge in the industries of the future.
Diversification
The EM investment universe spans over 80 distinct countries, with varied growth engines and economic drivers. As well as providing valuable portfolio diversification, investing in EM provides exposure to exciting businesses and economies growing in prominence, supported by trends such as urbanisation, demographics and rapid technological advancements.
Disciplined
EM economies have come to be characterised by fiscal and monetary discipline, in a reversal of roles with DM. This is also reflected in the corporate universe, where EM companies enjoy strong credit quality and better governance standards. Discipline applies to our approach too; it takes rigour and selectivity to choose the winners of tomorrow.
Emerging market debt
Emerging market debt (EMD) has historically been viewed as a tactical allocation, but structural improvements in policy credibility, fiscal discipline, and market depth now position it as a core component of a diversified portfolio. We think EMD is attractive for investors looking for a stable allocation to an asset class that is supported by strong growth, increasing credibility, and diversification.
The M&G (Lux) Emerging Markets Bond Fund is a flexible, ‘best-ideas’ fund that invests across all emerging market debt securities – be they sovereign, corporate, high quality, or high-yield – denominated in hard currency and any emerging market (EM) currency. It is our conviction that this investment universe offers one of the best opportunities to create a genuinely diverse portfolio across countries, sectors, regions, and currencies.
Emerging market equities
From fast-growing economies to innovative companies reshaping global industries, emerging markets offer a breadth of opportunity — alongside meaningful complexity. The M&G (Lux) Global Emerging Markets Fund is built on a disciplined, bottom-up approach focused on identifying companies with stable and strong or low and improving returns on capital. It aims to deliver consistent outperformance by investing across four distinct stock categories, each selected for its potential to generate alpha across different market cycles. With high active share and proprietary research, the strategy reflects a differentiated, long-term commitment to shareholder alignment and valuation discipline.
To help investors cut through the noise, Michael Bourke, Head of Emerging Market Equities, breaks down both how we invest and why the asset class presents compelling prospects over the long term.
Why should investors be excited by emerging market equities today?
How does our approach identify opportunity in emerging markets?
M&G (Lux) Emerging Markets Bond Fund investment policy:
The Fund aims to provide a higher total return (capital growth plus income) than that of the global emerging markets bond market over any three-year period while applying ESG Criteria. The Fund has the flexibility to invest across all types of emerging market debt, which includes sovereign, corporate and local currency debt. The Fund invests at least 80% of its Net Asset Value in debt securities denominated in any currency, issued or guaranteed by emerging market governments or their agencies, local authorities, public authorities, quasisovereigns, supranational bodies and by companies that are domiciled in, or conducting the major part of their economic activity in emerging markets. The Fund seeks to make investments that meet the ESG Criteria, applying an Exclusionary Approach as described in the precontractual annex. The fund’s recommended holding period is 3 years. In normal market conditions, the fund’s expected average leverage is 150% of its net asset value.
M&G (Lux) Global Emerging Markets Fund investment policy:
The Fund aims to provide a higher total return (capital growth plus income) than that of the global emerging markets equity market over any five-year period while applying ESG Criteria. At least 80% of the Fund is invested in the shares of companies that are based, or do most of their business, in emerging markets. The Fund may invest in China A-Shares via the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect. The Fund invests in securities that meet the ESG Criteria, applying an Exclusionary Approach and Positive ESG Tilt as described in the precontractual annex. The recommended holding period is 5 years.
The main risks associated with the funds:
- The value and income from the funds' assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the funds will achieve their objective and you may get back less than you originally invested.
- Investing in emerging markets involves a greater risk of loss due to greater political, tax, economic, foreign exchange, liquidity and regulatory risks, among other factors. There may be difficulties in buying, selling, safekeeping or valuing investments in such countries.
- The funds can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.
- ESG information from third-party data providers may be incomplete, inaccurate or unavailable. There is a risk that the investment manager may incorrectly assess a security or issuer, resulting in the incorrect inclusion or exclusion of a security in the portfolio of the fund.
- Please note, investing in the funds means acquiring units or shares in a fund, and not in a given underlying asset such as building or shares of a company, as these are only the underlying assets owned by the fund.
- Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.
- The M&G (Lux) Emerging Markets Bond Fund may use derivatives to profit from an expected rise or fall in the value of an asset. Should the asset’s value vary in an unexpected way, the fund will incur a loss. The fund’s use of derivatives may be extensive and exceed the value of its assets (leverage). This has the effect of magnifying the size of losses and gains, resulting in greater fluctuations in the value of the fund.
- The M&G (Lux) Global Emerging Markets Fund may invest in China A shares. Investments in assets from China are subject to changeable political, regulatory and economic conditions, which may cause difficulties when buying, selling or collecting income from these investments. In addition, such investments made via the Stock Connect system, may be more susceptible to clearing, settlement and counterparty risk. These factors could cause the fund to incur a loss.
Further details of the risks that apply to the funds can be found in the funds' Prospectuses.
The team
Our Emerging Markets capability is supported by a highly experienced team spanning London, Singapore, Hong Kong, Mumbai, and Cape Town. This diverse group combines deep sector knowledge across financials, technology, healthcare, and infrastructure with regional insights into Asia, Latin America, and the Middle East. Together, they deliver rigorous research and disciplined portfolio construction, ensuring a robust foundation for long-term investment success.
Charles de Quinsonas
Head of Emerging Markets Debt
Michael Bourke
Head of Emerging Markets Equities
The views expressed on this page should not be taken as a recommendation, advice or forecast, nor as a recommendation to purchase or sell any particular security.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance.
