Emerging markets (EM) are increasingly becoming the focal point for investment strategies among the world’s top money managers. According to Citigroup, top asset managers – those overseeing funds in excess of $20T – see EMs as engines for significant growth in FY26 citing robust global economic conditions and a soft U.S. dollar.
The MSCI Emerging Markets stock index recently reached a record high, reflecting a favourable sentiment towards EM stocks. As trading volumes in ETFs associated with emerging markets continue to surge, asset managers are betting on this upward trend.
This shift in focus from developed markets is largely driven by uncertainty surrounding fiscal policies and rising bond yields in major economies like the US, Japan, and Germany.
Strategic Predictions from Asset Managers
Fund managers are not only optimistic about equities in Asia and Latin America but are also increasing their long positions in EM bonds. This marks a significant contrast to their shorter positions in US Treasuries and core European sovereign debts.
According to Citi, this strategic pivot presents an opportunity, particularly as emerging markets continue to attract capital.
Despite recent market volatility sparked by concerns regarding artificial intelligence’s potential economic disruption, assets in emerging markets have shown resilience. For instance, the MSCI EM Index achieved a 0.7% increase, bolstered by gains in Asian technology shares and a weakening dollar.
Performance of Emerging Market Bonds and Assets
The performance of EM bonds has been noteworthy, with a Bloomberg gauge of local currency government bonds returning 2.2% so far in 2026, following an impressive annual return of 8.5% last year: the best performance since 2017.
Likewise, a similar index tracking sovereign dollar bonds is up 1.7% in 2026, building on last year’s 13% growth.
Role of Gold in Investment Strategies
Investors are keeping a keen eye on gold as a stable investment choice amid fluctuating market trends. Fund managers have increased their positions in precious metals recently, fueled by strong central bank demand and the outlook for a weaker dollar.
Citigroup emphasizes that there is a consensus among fund managers regarding the strategy of going long on gold while adopting a short position on the dollar.
As emerging markets continue to demonstrate their potential for growth, fuelled by favourable economic conditions and strategic investment decisions from top money managers, they are poised to capture significant attention in 2026.
Staying updated on these market dynamics will be crucial for savvy investors looking to capitalise on opportunities in emerging economies.
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