The term “emerging markets” was coined in the 1980s to refer to developing countries that offer opportunities for investors. Countries that show greater growth potential than developed countries, because of rapid economic and demographic development, are generally regarded as emerging–market countries. As a result, investing in emerging markets offers the prospect of attractive returns, and their relatively low correlation with developed markets means that they are an effective way of diversifying a portfolio. However, they may carry a higher level of risk than developed markets, because of issues relating to exchange rates, liquidity, economic and political governance and a possible lack of legal certainty.
Given their complexity and unique features, expertise on local markets is essential for those wanting to invest in emerging markets. As a result, investment funds managed by specialist professionals remain a preferred way of gaining exposure to emerging markets.
Since this investment universe is becoming ever more important within portfolios, the world of finance has come up with several acronyms to try and group together certain emerging markets showing similar characteristics. In 2001, for example, Jim O’Neill, then chief economist at Goldman Sachs, came up with the term BRIC to refer to the leading emerging-market countries of Brazil, Russia, India and China. South Africa was added a few years later, resulting in the acronym BRICS. More recently, Mr O’Neill coined the term MINT to refer to Mexico, Indonesia, Nigeria and Turkey, which are the main emerging markets after the BRICS countries. Finally, there is also CIVETS, an acronym devised by HSBC to refer to the high-potential emerging economies of Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.Emerging markets fixed income