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EM ETF AUM doubles to a record high

A curious chart was staring me in the face as I went through my excel models pressing 'refresh' on the data feeds. The chart showed the formerly unloved emerging market equity ETF assets under management surging - doubling over the past year - to a record high.

If that doesn't get your attention then you've probably lost the passion!

The chart and the following statistical soup comes from my latest weekly report.

Dedicated emerging market equity ETF AUM has roughly doubled over the past year to a record high.

Going to the question in the title, are EM equities actually underallocated?

There's a couple of angles to this question and it's a leading question because I've looked at the numbers... so here's 5 facts about EM equity allocations.

1. The share of EM and developing countries of global GDP = 58%

2. The share of EM equities a % of global market capitalization = 14%

3. The allocation to EM equities in the MSCI ACWI = 8%

4. Dedicated EM funds as a % of all ETF AUM = 6%

5. Dedicated EM funds as a % of all mutual fund AUM = 2%

It's interesting to note the disparity between EM as a % of global market cap in contrast to EM as a % of global GDP, let alone the other stats.

But even looking across the other stats presents an interesting picture. The weight in ACWI (All Countries World Index) is about half of global market cap representation, and the market share of dedicated EM funds is smaller yet.

Strictly speaking you could make an argument that EM is underallocated on some of the stats above. Having said that, the increase in EM ETF AUM has been heroic and whenever you see a surge in assets like that, regardless of over/underallocation, it makes you stop to think...

This article originally appeared as a submission at See It Market

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