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Factor Investing in Emerging Markets

Is It Worth It?

Nicolas Rabener
10 min read
4 Nov 2019

SUMMARY

  • The trends in factor performance are similar in emerging and developed markets
  • Factor returns were higher in emerging than in developed markets
  • However, higher transaction costs need to be considered carefully

INTRODUCTION

Capital markets of developed countries like the US are highly efficient and mutual fund managers have struggled to generate any alpha, at least after fees. Theoretically, fund management firms could have decreased costs and created more attractive products years ago, but chose not to do so and subsequently were disrupted by the ETF industry.

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