“We discourage investors from thinking about emerging markets opportunistically,” said Edelman, who invests in passively managed ETFs that track market indexes. “They should maintain a stable, long-term position and rebalance to targets.”
His target allocations for clients are relatively low. He typically allocates between 0 percent and 5 percent of a client’s assets to emerging markets based on their appetite for risk.
“Emerging markets are a risky and volatile asset class,” Edelman said. “We believe in holding a position in them, but we limit it because of the volatility. It’s a risk we feel we just aren’t very well compensated for.”
Vanguard Group’s Aliaga-Diaz, however, suggests that U.S. investors should be increasing allocations to emerging markets in line with these countries’ growing share of global market capitalization.
“We’re not overly optimistic, but we’re also not pessimistic,” he said. “On a long-term basis, emerging markets are still growing faster than developed markets.”