PASSIVE EMERGING MARKETS INVESTING GETTING POPULAR
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Comvest closes credit fund at $1.3 billion
      Wall Street signage in the Financial District of New York
      Assets in alternative investments set record in 2020
      Non-profit questions dividend recapitalization play at Ares portfolio company
      Walker & Dunlop appoints managing director
    • Philip Pearson
      Hymans Robertson chooses head of LGPS investment
      Daniel Celeghin
      Indefi hires New York-based managing partner
      Hub International continues buying spree with IBG acquisition
      Callan brings on 2 executives
    • Pandemic takes toll on real estate fundraising in 2020
      Swedish flags fly from a tourist souvenir shop in Gamla Stan in Stockholm on March 26, 2020
      Systematic hedge fund IPM to shutter after ‘lackluster’ performance, outflows
      Insurers taking on more portfolio risk as pandemic ebbs – survey
      American flags outside the New York Stock Exchange
      Stock shorts collapse as no hedge fund wants ‘head ripped off’
    • Comfy retirement still on track for most Americans despite pandemic – survey
      Pentegra joins with EPIC to offer 3(16) fiduciary services
      Joseph Healy
      Smaller DC plans place greater focus on improving financial wellness efforts
      Interest rises in keeping retiree assets in-plan
    • CDPQ boosts low-carbon assets to 10% of portfolio
      White House sets ambitious goal for greenhouse gas emissions by 2030
      Yale rolls out 5 principles for endowment on fossil-fuel investing
      Pension funds hear from beneficiaries on ESG – report
    • Riscura stories
      Dystopian tales explore altered retirement reality
      Joel Holsinger
      Ares wants to do good – and profit – with fund
      Girls Who Invest
      MetLife plans 3 internships for Girls Who Invest scholars
      Model home
      Resmark sees niche in buying, leasing model homes
    • Swedish flags fly from a tourist souvenir shop in Gamla Stan in Stockholm on March 26, 2020
      Systematic hedge fund IPM to shutter after ‘lackluster’ performance, outflows
      Credit Suisse logo
      Credit Suisse expects further hit from Archegos scandal
      Karen Karniol-Tambour
      Bridgewater appoints 2 co-CIOs to oversee new sustainable investing group
      Hedge funds post best first-quarter return since 2000
    • Trillium hires 2 to lead expansion into U.K.
      CDPQ boosts low-carbon assets to 10% of portfolio
      White House sets ambitious goal for greenhouse gas emissions by 2030
      San Joaquin County casts net for core bond managers
    • Trillium hires 2 to lead expansion into U.K.
      Bill Hench
      First Eagle gives wing to small-cap equity team with liftout from Royce
       Kaitlin M. May
      Putnam Investments names head of global institutional management
      Paul Griffiths
      HSBC Asset Management selects next global head of institutional business
    • Denmark’s ATP plans bid to build North Sea energy island
      PennPSERS taps Verus for oversight consulting services amid probe
      State pension plan funding advances in first quarter – Wilshire
      Sacramento County Employees rebalances equity, fixed-income portfolios
    • SEC names new enforcement chief
      Trillium hires 2 to lead expansion into U.K.
      Walker & Dunlop appoints managing director
      Bill Hench
      First Eagle gives wing to small-cap equity team with liftout from Royce
    • EQT closes latest private equity fund at $18.7 billion
      U.S. $100 bills
      AlpInvest raises $3.5 billion for latest co-investment fund
      ILPA members making diversity a bigger priority in private equity
      European private equity deal value, volume hit records for first quarter
    • Pandemic takes toll on real estate fundraising in 2020
      J. Tomlinson Hill
      Two Sigma takes quant expertise into real estate investing
      BentallGreenOak closes latest European fund at $2.3 billion
      Cohen & Steers adds team for new private real estate business
    • Andy Schreiner
      New PEPs targeting firms without retirement plans
      Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • A coin representing Bitcoin cryptocurrency in the U.K.
      Cryptocurrency and digital assets
      Corporate pension contributions
      Eddy Awards 2021
      COVID-19: One year in
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Alexandria, Va., scouting for DB and DC plan consultants
      Gresham, Ore., hunting for 457 plan consultant
      San Joaquin County casts net for core bond managers
      Rhode Island commits $25 million to buyout fund
    • Alexandria, Va., scouting for DB and DC plan consultants
      Gresham, Ore., hunting for 457 plan consultant
      San Joaquin County casts net for core bond managers
      Rhode Island commits $25 million to buyout fund
    • Emerging Market Debt Manager Services
      Real Assets Consultant
      Passive Investment Management Services
      Active Extended Global Credit Manager Search
    • High-yield spreads narrow, default rates drop
      Private real estate funds continue rebound
      Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • BPTW cartoon
      P&I’s Best Places to Work marking a milestone
      Marcie Frost
      CalPERS: Urgency underscores all areas of providing retirement security
      CalPERS cartoon
      Urgency underscores CalPERS' search for a CIO
      Multiemployer plans cartoon
      Money — but no fixes — for multiemployer plans
    • Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
      COVID-19 Makes LP Portfolio Management More Important Than Ever
      China: the outlook is bright for longer-term investors
      Finding Differentiation in Securitized Assets
    • John Bakarat
      Commentary: COVID-19 and real estate debt – where investors should be looking
      Jake Remley
      Commentary: Inflation expectations vs. reality in the bond market
      Greg Shea and Steven Kindred
      Commentary: The solution for yield-seeking allocators may be hiding in plain sight
      Jim Park
      Commentary: Asian Americans, Pacific Islanders face ‘bamboo ceiling’ in money management
    • Marcie Frost
      CalPERS: Urgency underscores all areas of providing retirement security
      Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
    • P&I Content Solutions
      Research for Institutional Money Management
      P&I Content Solutions
      Top questions for institutional investors
      Sponsored Content By Newton Investment Management
      Growth and Innovation in Emerging Markets
      P&I Content Solutions
      Fixed income 2021
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • Invesco logo shown on the floor of the New York Stock Exchange
      watch video
      1:28
      Invesco’s bid for performance gains
      watch video
      1:23
      The passive fixed-income glut
      watch video
      1:38
      Is it time for DC plans to embrace private equity?
      watch video
      5:39
      The coronavirus pandemic: One year later
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Investing in infrastructure at the right price
      Time for Action: Shifting Pension Dynamics from a Macro and Regulatory Relief Perspective
      Understanding the PEP Evolution
    • POLL: Cryptocurrency investing
      POLL: The Biden infrastructure plan
      POLL: Retirement income solutions
      POLL: Working after the pandemic
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • High-yield spreads narrow, default rates drop
      By the Numbers for April 2021
      Graphic: The state of DC plans
  • Events
    • Conferences
    • Webinars
    • DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
      Retirement Income Conference
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Investing in infrastructure at the right price
      Time for Action: Shifting Pension Dynamics from a Macro and Regulatory Relief Perspective
      Understanding the PEP Evolution
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Print
April 29, 1996 01:00 AM

PASSIVE EMERGING MARKETS INVESTING GETTING POPULAR

Margaret Price
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Passive investment in emerging markets is gaining ground as more big pension funds look to invest but find active management wanting.

    Overall, active emerging markets management remains the strategy of choice. But interest in passive strategies has begun increasing. The $62 billion California State Teachers' Retirement System, Sacramento, for example, will passively invest its forthcoming dedicated emerging markets allocation; fund officials wouldn't reveal the size.

    And although the $16.9 billion New York City Teachers' Retirement System, the $9.7 billion New York City Teachers' Variable Fund and the $10.9 billion New York City Police Pension Fund all hired active emerging markets managers this year, not all of the target allocation have been distributed. The funds "are going to look seriously at passive products" when additional allocations go out, perhaps in 12 to 18 months, said New York Deputy Comptroller Jon Lukomnik, who represents the New York Comptroller on boards of the New York City public pension funds.

    Moreover, the $3.1 billion Missouri State Employees' Retirement System, Jefferson City, will consider four passive managers among its 16 emerging market manager candidates. The fund expects to pick one manager for a $75 million portfolio, probably in June, said Chief Investment Officer Rick Dahl.

    Experts say that for very large funds, passive investing in emerging markets may make sense in light of the relatively large allocations they would make; given the size of these investments, funds might otherwise be forced to hire an array of active managers, whose fees are noticeably higher than those of passive managers.

    What's more, the performance of active emerging markets managers overall hasn't been stellar. Even as the entire sector wallowed in 1994 and 1995 (but not in this year's first quarter), the typical active manager worsened the problem by underperforming the much-watched Morgan Stanley Capital International Emerging Markets Free Index.

    In fact, that problem persisted over the three years ended Dec. 31, 1995: the median manager in the emerging markets universe of InterSec Research Corp. underperformed the MSCI-EMF index in each of those three years, and has not outperformed the index since 1992. In the four years ended Dec. 31, 1995, the median manager's per annum 14.5% return just slightly nosed out the EMF index's 14.4%.

    Such data made impressions on California teachers' fund officials.

    "We started investing in emerging markets three years ago" by giving active international managers with emerging markets capability leeway to invest up to 20% in developing markets, said Thomas E. Flanigan, chief investment officer. The fund now has about $350 million in emerging markets. But when the fund wanted a specific emerging markets allocation, it took the passive route. Not only was size of allocation an issue, but so was performance.

    Passive investment "became evident as the staff called my attention to the fact that emerging markets indexes were outperforming active management," said Mr. Flanigan. "We had thought active management had an edge because managers would be more knowledgeable in these areas and could be more fleet-of-foot" in addressing opportunities. "But this may not be the case," he said.

    The fund is developing its own emerging markets index in conjunction with State Street Global Advisors, Boston. Although it hasn't been decided, the index may be equal-country weighted (with first and second tiers of 10 countries) vs. market-capitalization weighted, Mr. Flanigan said.

    The New York City funds "chose active managers because we did not believe that existing passively managed products had yet been proven," said Mr. Lukomnik. "That being said, both funds reserved a large tranche" of future funding for emerging markets. "One of the key things we would be looking for would be a passive product.

    "New York City historically has been a big believer in passively managed portfolios," Mr. Lukomnik said. But because emerging markets indexes have been changing - especially with the addition of South Africa's market into major indexes last year - it appeared they could still use a "little more seasoning," he said.

    Of course, active managers believe they can outperform the indexes and, in some cases, they have. Data from Pensions & Investments' Performance Evaluation Reports show that for the three years ended Dec. 31, 1995, 10 of 21 managers for whom performance data were available bettered the 15.4% annualized return of the EMF index.

    In order of performance, the managers were: City of London Investment Management Co. Ltd., London; Templeton Investment Counsel, Fort Lauderdale, Fla.; J.P.Morgan Investment Management, New York; Marvin & Palmer Associates, Wilmington, Del., and Pictet International Management, London, whose performances were tied; RogersCasey Investment Advisors, Darien, Conn.; Boston International Advisors, Boston; Lazard Freres Asset Management, New York; Genesis Investment Management, London; and AIG Asset Management, New York.

    But whatever the pros and cons of active vs. passive emerging markets investing, ever larger sums in aggregate are flowing into the sector - despite poor 1994 and 1995 showings.

    In the first quarter of 1996, pension funds hired managers for $772 million of emerging markets assignments. That was up from $670 million in 1995's first quarter and $146 million in the first quarter of 1994, according to data of Eager & Associates, Louisville, Ky. However, the number of placements fell to 26 in the first quarter vs. 29 in the same period last year, Eager's data show.

    And these statistics only reflect known hirings. According to Reza Vishkai, international research director of consultant RogersCasey, Darien, Conn., emerging markets investing by his firm's clients was higher in the first quarter than in the previous 18 months.

    Meanwhile, some funds are closed, including the $7.1 billion Emerging Markets Growth Fund of Los Angeles-based Capital International. As of mid-March, commitments for all 18.9 million of the fund's shares authorized for sale this year were taken up. It was the earliest share sellout since 1993 - the year that a limit on annual share sales was imposed, said company officials.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
    COVID-19 Makes LP Portfolio Management More Important Than Ever
    China: the outlook is bright for longer-term investors
    Finding Differentiation in Securitized Assets
    Green and sustainable bonds in emerging markets
    Portfolio Protection: One Size Fits None
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    April 5, 2021 Page One

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    弊社の関連事業
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    P&Iのミッション

    "機関投資家向け市場で資金運用を行う経営者に向けてニュース、リサーチ、分析を継続配信すること”

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center