Apparently so, according to a report released this week by Create Research and Principal Global Investors. Emerging markets have been plagued with underperformance for years and were hit especially hard when the US Federal Reserve announced its plans to begin tapering its quantitative easing programme.
The report, which surveyed 704 pension plans, sovereign wealth funds, consultants and asset managers from across the world, showed a large negative shift in investor sentiment between the 2012 and 2014 surveys.
This year only 20 per cent of respondents said they remained "believers" in emerging markets, compared with 38 per cent in 2012.
And the proportion of respondents saying it is time to get out has doubled, with 12 per cent listing themselves as "deserters".
The report also showed the way in which investors are allocating their assets has changed, with 51 per cent saying they use EM bonds for opportunistic investing and 48 per cent saying the same for EM equities. This is up from 15 per cent and 30 per cent respectively in 2012.
The report, which surveyed 704 pension plans, sovereign wealth funds¹, consultants and asset managers from across the world, showed a large negative shift in investor sentiment between the 2012 and 2014 surveys.
This year only 20 per cent of respondents said they remained "believers" in emerging markets, compared with 38 per cent in 2012. And the proportion of respondents saying it is time to get out has doubled, with 12 per cent listing themselves as "deserters".
The report also showed the way in which investors are allocating their assets has changed, with 51 per cent saying they use EM bonds for opportunistic investing and 48 per cent saying the same for EM equities. This is up from 15 per cent and 30 per cent respectively in 2012.
One surprising finding in the report is that investors see more value in African frontier markets than emerging markets.
Jim McCaughan, global CEO of Principal Global Investors, said this has been evidenced in flows by investors. "The story is partly about Africa because Africa is opening up commercially and from a market point of view," he added.
The Royal County of Berkshire Pension Fund is one scheme which has embraced frontier markets. The local authority scheme, which has invested in Africa for five years, now has investments in around 15 African countries, with plans to expand into five more.
The report also looked at how defined benefit schemes are allocating their assets. The graphs below show DB schemes around the world have a huge appetite for real assets. The report finds the appetite for real estate and infrastructure were far higher than any other of the previous six surveys.
McCaughan said there has been a big push by investors towards passive funds for equity and bond holdings.
Meanwhile in the opportunistic camp, distressed debt and alternative credit were creeping up the agenda for many schemes. Much of this demand is coming from schemes looking to hedge their liabilities but not wanting to lock into low yields.
¹The original version of this article incorrectly stated that the report surveyed 734 investors, when it fact it surveyed 704.
