A number of things have happened. First, starting in mid-2016, we saw an end to a major earnings recession in emerging markets (EM). Second, from 2012 to 2016, we had a massive fall in commodity prices, which we believe is over. While we're not extremely bullish on commodities, not being bearish is an important starting point for this asset class. We saw a big bounce off the bottom of commodity prices in 2016 and now we think we are in a long, drawn-out move sideways.
The third thing I would point out is that valuations are attractive. They may be a tad above their historical mean, but we think emerging markets can trade at a significant premium, primarily due to changes in the composition of the universe. Ten years ago, the biggest names in this universe were companies like Gazprom, Petrobras, PetroChina and big, cyclical state-owned type companies. Today, the biggest names are Alibaba, Tencent and Samsung, which are much higher-quality companies delivering a higher return on invested capital (ROIC). These companies deserve a much higher multiple.
The final point I'll make on valuation is that the relative multiple is very attractive. We have seen developed market multiples climb a tremendous amount, and EM is trading at about a 30% discount to the S&P 500, for instance, so we don't have concerns on the multiple.