Swiss fund manager SYZ & Co. Group has launched an equally-weighted emerging markets index covering the 21 countries in the MSCI EM index.
It claims that this index gives a more balanced approach to emerging markets than market capitalisation-weighted indices, which lead to an over-representation of certain countries and a concentration of geopolitical risk. Typically, the five largest markets – China, South Korea, Brazil, Taiwan and South Africa – account for more than 65% of the index. In addition, SYZ said a market cap-weighted emerging market index is overweight in commodities and large state-owned energy and banking companies. In contrast, the SYZ Emerging Markets Index gives each of the 21 countries a maximum weighting of 6.3% in the index, with smaller countries having a lower weighting. Adjustments are also made for market liquidity. The SYZ Emerging Markets Index has outperformed the MSCI EM in 9 years out of 11, with an average annual outperformance of 3.3% over 10 years. Katia Coudray Cornu, head of SYZ fund research said: “We wanted to revisit the way in which the country allocation of an emerging market fund is carried out.”