Canadian investors should rebalance their investment portfolios, allocating more of their funds to high-growth emerging markets, according to Peter Marber, manager of global emerging markets fixed income at HSBC Global Asset Management (U.S.).

At HSBC’s Emerging Markets and Brazil Conference in Toronto on Wednesday, Marber said few investors have effectively positioned their portfolios for the shift that’s occurring in international growth patterns.

“Structurally, the centre of the world economy is shifting. There’s much better growth and demographic prospects in these emerging market countries,” Marber said. “That’s why we think it’s an interesting time to reconsider your long-held investment beliefs.”

Although developed markets have traditionally been viewed as a relatively safe and reliable source of growth for investors, this won’t necessarily be the case in the years ahead. Marber pointed out that developed countries’ populations are aging, and their labour forces are set to start declining.

In contrast, the prospects for emerging markets are bright.

“Emerging markets are 85% of the world’s population, they have 77% of the world’s land, they have 70% of the world’s hard currency reserves,” Marber said. “They have very young, dynamic populations that are growing.”

Marber encouraged investors to consider these factors in their investment decisions, focusing on the future rather than falling back on old investing habits.

He noted that emerging market have already begun to outperform developed markets in terms of investment returns. During the last decade, for instance, investors in emerging market debt earned more than double the returns of U.S. debt. Emerging market equities returned 184% over the decade, while U.S. equities posted negative returns.

Emerging markets were also affected by the credit crisis to a much less severe extent than developed countries, Marber pointed out.

“If you had big allocations to emerging market bonds and emerging market equities,” he said, “your portfolios wouldn’t have lost as much value, and they actually would have probably recovered the value that they lost, relatively quickly.”

Concluded Marber: “There’s an enormous amount of opportunity there.”

IE