Should you invest in emerging markets and, if yes, should you take an active or passive approach?

For Paul Kapsos, portfolio manager for emerging markets with the Ontario Teachers’ Pension Plan (Teachers’), the answer as to whether to invest is a definite ‘yes.’ He points to the success emerging markets have shown over the past several years in comparison to their developed counterparts.

“A lot of the crises that were characteristic of emerging markets in the 80s and 90s have fallen away—both because they’re less frequent now and because the great financial crisis we saw in 2008 has overwhelmed that,” he says. “Emerging markets—equities and bonds—have had a pretty good crisis. Countries didn’t blow up, they didn’t have major issues. Emerging markets have shown to be somewhat less risky, so this makes them more appealing.”

When it comes to determining your strategy, Kapsos says it comes down to a trade-off between the low cost and simplicity of passive strategies and the high cost—but potentially higher returns—of active ones.

Another consideration, he says, is that active strategies tend to perform better when there’s uncertainty in the market.

“If you see a lot of uncertainty coming forward, they can navigate that uncertainty pretty well. It only takes a couple of good decisions.”

Watch the video to find out what else Kapsos had to say on the topic, and to learn how Teachers’ is taking advantage of emerging markets.

Copyright © 2020 Transcontinental Media G.P. Originally published on

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