Global index investors, beware!

Emerging markets comprise over 40% of the global economy, but many global equity indices consistently allocate under 10%. But this market cap mismatch is easy to rectify.
 

Emerging markets are now the main drivers of global growth - yet investors using ‘global’ indices and trackers could be dramatically underexposed.

The fast-moving emerging markets now account for 40% of global economy and nearly two-thirds of global growth. But popular global benchmarks like the FTSE All-World Index give them less than a 10% weighting. ²

The result? A gaping mismatch between where the growth is happening - and where your money is invested.

So why the disconnect? Blame the way indices are constructed. Most benchmarks are based on the size of a company (market cap) not real-world economic contribution.

This market cap mismatch means that companies in developed economies - especially the US - dominate, while emerging regions are wildly underrepresented, despite offering faster growth and younger demographics.

Nine of the top 10 companies in the FTSE All-World Index are US based with TSMC – the Taiwanese-based semiconductor giant that is powering global technology development making the list in 10th position.³  In fact, over 62% is allocated to the US – a massive skew to one single country – that could add risk by limiting diversification. ⁴

So ‘global’ investors may be systematically underexposed to the economies that are actually powering global economic growth.
 

Source: IMF World Economic Outlook, as of June 2025. Current prices, Billions of US Dollars.

This year, emerging markets have outperformed their developed peers - powered by solid fundamentals and a shift in investor sentiment. Meanwhile, confidence in the US is wobbling. Moody’s downgrade of US debt and unpredictable trade policies like tariffs have raised red flags.

It forces a rethink of what ‘global investing’ really means.

Major institutions are already adjusting. Bank of America has called emerging markets “the next bull market,” and JPMorgan has upgraded its stance to ‘overweight.’ Why? Attractive valuations, easing geopolitical tensions, and a more favourable macro backdrop.

Emerging markets are no longer just factories for the West – they are centers of innovation, with world-class technology, fintech, green energy and digital infrastructure.

They are home to young, growing populations and expanding middle classes. From India’s consumer boom to Asia’s tech giants, Latin America’s resources, and the Gulf’s economic transformation, the opportunity set is broad and dynamic.

Yes, risks remain - country level volatility and currency swings - but we believe the long-term trends are too powerful to ignore. And there are risks to investing in developed markets too! Think of Liz Truss’s mini-budget and President Trumps tariff war that shocked markets.

Despite the compelling case, many UK investors could be underexposed. Fortunately, it is easy to adjust and top-up your exposure to growth through emerging markets.

Templeton Emerging Markets Investment Trust (TEMIT) is a simple, proven way to boost your exposure. A collection of high-quality companies across emerging markets handpicked by top-rated investors. 

• UK’s first and largest emerging markets trust
• Invests in 60–80 high-quality companies across diverse regions
• Over £2 billion in assets and a 35-year track record
• Managed by two AAA-rated portfolio managers ⁵ – making the investment decisions backed by 70 analysts in 14 countries.