Emerging market banner image

Emerging Markets

Parametric’s Emerging Markets strategy positions portfolios to capture the long-term growth potential in emerging markets with less volatility than indexes typically exhibit.

emerging market icon heading

 

Traditionally, emerging market indexes tend to have concentrated country allocation, with 75% of holdings in just five countries. Parametric’s strategy avoids the concentrated security- and country-level exposures inherent in other emerging market strategies using our equal-weight methodology. We seek to outperform the MSCI Emerging Markets Index by 2% to 3% over a full market cycle.

Explore more systematic solutions

Parametric’s strategy relies on a rules-based approach, in combination with a systematic rebalancing discipline, to reduce concentrations and emphasize broad diversification in seeking its objective of capital appreciation. Relying on the asset class experiencing frequent large drawdowns is central to our approach. During these periods of market weakness, a diversified portfolio typically outperforms a more concentrated one. By preserving capital during down markets, the diversified portfolio then has a leg up for whenever the market does return to growth.

How it works

The country selection process is driven by a tiered approach in which countries are equally weighted within four tiers based on market capitalization and liquidity. As a result, we underweight bigger countries and overweight smaller ones. Countries that are unable to maintain a Tier 4 weight we consider to be transition countries.
Once country exposure is determined, we set sector-level target weights in each country in an attempt to move closer to an equal representation from each economic sector while taking into account practical liquidity considerations.
Security weights are based on market capitalization within their country-sector combination but are largely viewed as exposure units used to fill each country-sector weight.
Systematic rebalancing brings countries back to target weights while balancing practical considerations like transaction costs. Rebalancing is usually prompted by a country’s overweight in the portfolio. 

Intended benefits of Emerging Markets

Equal-weight methodology icon

Equal-weight methodology

Learn more >>

Our modified equal-weight methodology aims to reduce imbalances. Incorporating an underweight to the largest markets and an overweight to smaller emerging-market countries can reduce volatility and increase potential returns.

Top-down approach icon

Top-down approach

Learn more >>

Our approach follows a rules-based process that produces transparent outcomes. We aim to capture the long-term growth potential of emerging markets by avoiding the risk inherent to active management and concentration risks of mainstream indexes.

Disciplined rebalancing icon

Disciplined rebalancing

Learn more >>

Disciplined rebalancing to predefined target weights results in a “buy-low/sell-high” orientation that can enhance returns and minimize trading costs.

Why choose Parametric?

firm aum icon


$376B+

Total firm
AUM



emerging markets aum icon


$2.1B

Emerging markets
AUM



experience icon


27

Years of emerging
markets experience



As of 6/30/2022

Get in touch

Want to know more about our Emerging Markets solutions? Complete our contact form, and a representative will respond shortly.

More to explore

This Material Is Intended for
Institutional Investors Only


By clicking Agree, you acknowledge that you have read the terms detailed below. You also confirm that you are a qualified institutional investor or a consultant to qualified institutional investors and wish to proceed. Parametric does not provide legal, accounting, or tax advice or consulting service.



The information on this area of the Parametric Portfolio Associates® LLC (“Parametric”) website is intended for qualified institutional investors and their consultants. This information is not intended for accredited investors in any jurisdiction outside the United States in which the distribution or sale of Parametric investment services is not authorized.

It is published for informational purposes only and does not purport to address the financial objectives, situation, or specific needs of any investor. If you do not qualify, the information shown on this site (which may include information about our investment strategies and products, market commentary, and composite performance) may not be relevant or appropriate for you. Certain solutions discussed in these materials will be subject to minimum investment amounts and other restrictions that apply. There can be no assurance that any investment product or strategy will achieve its investment objectives or that there will be any return of capital. Performance may be volatile, and investors could lose all or a substantial portion of their investment.



I acknowledge that I am a qualified investor and that I have read, understand, and agree to the above conditions.