Episode Description full (Apple Podcasts, Spotify):
Emerging markets are back in focus in 2026 — not just as a cyclical trade, but as investors reassess performance leadership, diversification, and where growth is showing up in a shifting global paradigm. After a long stretch of disappointing returns, emerging markets have started the year strongly, alongside record interest from global investors. But the case for EM today is less about a single story — and more about dispersion across countries, sectors, and themes.
In this episode of The Bid, host Oscar Pulido is joined by Alex Brazier, Global Head of Investment and Portfolio Solutions, and Sam Vecht, Portfolio Manager on BlackRock’s Global Emerging Markets Equities team. Alex shares what he’s hearing from investors across the U.S. and Europe, including the role of flows, sentiment, and portfolio positioning. Sam brings a bottom-up perspective on how emerging markets have evolved over the past two decades — and why market pricing hasn’t always reflected economic progress.
Together, they explore why emerging markets may play a different role in portfolios today: providing exposure to distinct parts of the AI buildout, offering potentially different valuation and earnings dynamics than developed markets, and responding differently to U.S. dollar moves. The conversation also highlights where opportunities may be emerging beneath the surface — from under-owned regions like Latin America and parts of the Middle East, to shifting sentiment around India — while underscoring the reality that EM remains volatile, cyclical, and highly heterogeneous.
Key insights from this episode:
• Why emerging markets are drawing renewed investor attention in 2026
• How performance, ETF flows, and surveys are reshaping EM positioning
• Where emerging markets can broaden portfolios — and where correlations still matter
• How AI supply chains show up differently across EM countries and sectors
• Why dollar dynamics can influence emerging markets in distinct ways
• How dispersion across regions is driving more selective, active approaches
Keywords: Emerging markets, Emerging markets investing, Capital markets, Global diversification, AI investing, U.S. dollar, Latin America equities, India markets, Middle East markets, Global portfolio strategy
Sources: BlackRock, data based on 1,245 EMEA survey submissions in February 3rd rapid response client call; BlackRock calculated using Aladdin data; 'World Economic Outlook, Global Economy in Flux, Prospects Remain Dim', IMF, October 2025; Bloomberg as at Dec 2025; BlackRock, Global Business Intelligence, as at 20 Feb 2026; BlackRock, Morningstar, Aladdin. Portfolio average allocation based on 166 Europe-domiciled Morningstar moderate-risk multi-asset FoF portfolios, positioning as of 31 December 2025. Global index refers to MSCI All Country World Index.
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to any company or investment strategy mentioned is for illustrative purposes only and not investment advice. In the UK and non-European Economic Area countries, this is authorized and regulated by the Financial Conduct Authority. In the European Economic Area, this is authorized and regulated by the Netherlands Authority for the Financial Markets. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures.
Oscar Pulido: Emerging markets have long been shaped by global forces, but in 2026, it's not just about reacting to the world's biggest economies, it's about how local dynamics, capital flows and investor sentiment are converging in a very different global paradigm.
From shifting trade relationships and diverging monetary policy paths to renewed focus on Europe's resilience and structural reform, investors are recalibrating how and where they deploy capital. So how are investors around the world actually positioning today? And where are the real opportunities and risks emerging from beneath the surface?
Welcome to The Bid, where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido.
Joining me from London are Alex Brazier, global Head of Investment and Portfolio Solutions, and Sam Vecht Portfolio Manager on the global emerging markets equities team within BlackRock's Fundamental Equities Group, Alex will share what he's hearing from investors across regions about capital flows and conviction levels. Sam will take us inside emerging markets where long-term structural themes, shifting geopolitics and company fundamentals are creating both challenges and compelling opportunities.
Alex and Sam, thank you so much for joining us on The Bid.
Alex Brazier: Thanks for having us. Oscar.
Sam Vecht: Great to be here.
Oscar Pulido: Well guys, today we're talking about emerging markets, which is a topic that we periodically talk about as part of a broader conversation, but I think it's interesting that we're going to have a more dedicated conversation today. Alex, you're currently joining us from London, last time we spoke on The Bid, you were in Singapore with Navin Saigal, and we were talking about the fixed income opportunities in Asia. But again, today we're going to talk about emerging markets. So, I'm wondering why is it that this topic is becoming more relevant now?
Alex Brazier: Well, emerging markets are having something of a Renaissance, they're in vogue right now, you see three things really going on. First, we saw really strong performance of the asset class in 2025 and that's continued year to date in 2026. Emerging markets broad index up 12-ish percent that's up there with some of the best performing asset classes of the year, like gold. It's two times what's happened to European equities this year. And remember, this is a period when the S&P has been broadly flat, a little bit down, a little bit up, so it's outperforming most other asset classes. That's the first thing.
Second thing is, at the same time, we are seeing huge interest from investors across the globe in this asset class. When we look at globally, flows into exchange traded funds associated with emerging markets, in the US January was a record monthly flow. And that surpasses the previous record, which was December 2025. It was double December 2025- itself at the time a record. And at this point we are a bit into the year, and we're running a total flow into these exposures around emerging markets, that's like the fourth highest year ever. And we're in February! Europe is the same, January record month coming off a record year last year. So we've got performance, we've got investors really showing interest in the asset class, really record flows.
And then the third thing is that when we survey investors on both sides of the Atlantic, they're telling us they really want more emerging markets exposures in portfolios. It's the top survey response when we ask investors in the United States, where are you planning to add to your portfolio in the next three months? And in Europe, 40% of respondents to these surveys are telling us they want to add more to their emerging markets exposures in their portfolios over the next three months. That's an unprecedented number in these sorts of surveys and that. Appetite seems to cut across investor types, it seems to cut across the risk appetite of the investors- so whether they're bullish or bearish- they just want emerging markets. So that's why we're here now in London talking about emerging markets.
Oscar Pulido: Well, and it's interesting 'cause oftentimes when we see asset classes or regions performing well, that leads to investor interest. So, I wonder if there's something. Maybe more structural happening here. And Sam, maybe I could bring you into the discussion. You've been an investor in the emerging market space for a while. You've been at BlackRock for over 25 years, and it says here, you've spent all but three months of your career covering emerging markets. So, it sounds like you found your calling pretty early. What have been your observations about the emerging market space today and how that compares to that last quarter century that you've been following these markets?
Sam Vecht: Well, I think, the most interesting aspect of emerging markets has been how awfully they've done for so long. If we think about it, there was a good period for emerging markets, roughly 2003 to 2007, and since then, emerging markets have gone nowhere. Economies of these countries have developed massively. Anyone who's gone to, whether it's Shanghai or South Paolo, or any emerging market capital or major city, would've seen unbelievable change, far greater change than would've seen in London or New York over that period of time. but the markets over that period of time had done really badly. They were probably rather overvalued if we go back to 2007, people thought the dollar would always strengthen, perhaps Nasdaq and the S&P would always go up and they would always outperform everything else. And I think the last 12, 18 months have seen people challenging those assumptions. Asking themselves the question, is there deep value here? Are there real technological changes here? Are there companies that we wish to invest in? And I think they're saying yes to all of those questions.
Oscar Pulido: Sam, you bring up an important point, which is that economies and markets are different things. You talked about how emerging market economies have actually grown substantially over the last 10 or 15 years, but that hasn't always translated into the performance of the markets and therefore important to evaluate both independently.
Alex, Sam's just talked about some of the trends that he's witnessed in emerging markets over the last few decades. When I think about the 2026 outlook and the conversation that we had with Jean Boivin from the BlackRock Investment Institute, he talked about this concept of a diversification mirage, which is how hard it is to find diversification in today's markets. Do emerging markets provide diversification. How can emerging markets add diversification into portfolios?
Alex Brazier: To a point I think is the kind of short answer, The point you were talking about in that episode with Jean was around how many more assets have become more closely correlated. and there's a chart in the background to that episode where we show that across 50 asset classes, 50 sub-asset classes, the average correlation between the different pairs of asset classes has risen by maybe 30% over the last few years. So, it's harder to build portfolios where the assets move in opposite directions or at least not very closely together. And that's the difficulty of diversification in this environment.
So why are people thinking about emerging markets? Firstly, you've got to be careful because just adding a different country or an emerging market doesn't necessarily diversify the portfolio because the common theme driving a lot in markets right now that you've talked a lot about on this podcast, which is the build out of AI. It's been a key driver of the US market, it's also a key driver of many emerging markets, like Korea, Taiwan, some of the commodity producers, who were all effectively caught up in this AI buildout. So you’ve got to be careful that just choosing a different country doesn't necessarily mean you are diversifying, those things are all going to be correlated with people's views about the AI build out and its pace.
But there are some senses in which emerging market equities in a portfolio can be broadening, if not diversifying and hedging. The first is that, within the AI theme, some of these economies are giving you exposure to a different part of the AI theme. So large part, they're about hardware, they're about memory chips, they're about the commodities that underpin that buildout rather than about the development of models or the training of models and the use of models. So, it's a different part of the AI ecosystem to get exposure to, in that sense. It's slightly diversifying.
I think the second way in which it's slightly diversifying is that what's happened in emerging markets has been driven, by current earnings. It's not that valuations of the earnings have shot up. So, if you're looking for a portfolio that's perhaps more resilient to a revision to expectations of future growth, what's happening in some emerging markets now looks more resilient than say what's happening in the US. Because in emerging markets, I think you're looking at an earnings multiple, maybe 18 times earnings in the broad index US something like 26. So, if you're looking for a portfolio that's just less exposed to a revision to future growth expectations, emerging markets can offer a bit there.
But then the third is, and we see this across the globe actually, that some investors are worried now about further modest, but still directional depreciation of the US dollar, and especially for investors outside the United States. This makes them worry more about volatility in their portfolio caused by currency moves.
Now, emerging markets might be some help here. Typically, a weaker dollar has tended to help emerging markets outperform, particularly if that weaker dollar is not associated with a sharp global growth slowdown. So, if really what you're worried about in the portfolio is a depreciation of the dollar, actually emerging markets have tended to help, partly because some of them have exchange rates linked to the dollar, partly 'cause some of them have balance sheets where they borrowed. In US dollar, and partly because some of them are selling outputs like commodities that are denominated in US dollars. So, there's a host of reasons why emerging markets have tended to outperform a bit when the dollar is depreciated. So, in that sense, emerging markets offer a little bit of resilience in the portfolio as well. But none of this is to say that emerging markets are always going to move in the opposite direction to your US equity or advanced economy equity exposure. It's just they may compliment it to give you a little bit more protection to some of these particular risks.
Oscar Pulido: It sounds like the story is a little bit more nuanced, and Sam, I think this is where you come in. You're a fundamental investor, you're looking at individual countries and sectors and security. So, I'm wondering, when you look in these regions, are there any areas that you're particularly bullish on where you think there's the potential for outperformance?
Sam Vecht: I think there's quite a lot of areas within emerging markets that look really good today. it's worthwhile remembering that emerging markets are a deeply cyclical asset class. 70, 80% of all stocks move 40% or more every single year. So, if one can't stomach that volatility, one has to avoid the asset class, it will be volatile regardless of however good the medium-term story is.
But within that, if one takes a slightly longer-term view, you look at Latin America, really not exposed to that AI theme at all. Latin America as a whole, it's about 7% of global GDP. It's 0.1% of global indices, it's just massively underrepresented. Brazil, Mexico, countries with challenges, countries with economic political challenges are well covered in the media, but if one takes that three, five-year view, does it really make sense to think that 7% of the world's GDP is completely absent from global portfolio? You look at the Middle East, really big changes a part of the world, which typically just attracts attention because of geopolitical concerns, fears of war, fears of all sorts of things. But anyone who's been to Dubai, anyone who's been to Riyadh in recent years will see just how unbelievably well these places are doing, not attracting much equity investment, but really exciting developments on the ground and really cheap stocks, trading below 10 times earnings, both in Latin America and across the Middle East. And then one goes, to a place like India. I think it's underperformed emerging markets by close to 50%in the last year, because everyone's excited by hardware, everyone's excited by the AI story and possibly India not a focus at all, and such a broad and deep market that people have forgotten. People were very excited a year ago, far less excited today, and that's really the story of emerging markets at any point. It's so broad, it's so deep, it's so heterogeneous that there's always a really interesting part of the market that people aren't looking at, and that's really our focus today.
Oscar Pulido: And I think some of these stats that you mentioned, I'll go back to the one that you mentioned on Latin America, 7% of GDP, but only 0.1% of market capitalization in the world. So, I guess it ties back a little bit to the economies are big and, and they've been growing, but that hasn't always translated into market performance. And I think what you're saying is that maybe that gap is going to close a little bit?
Sam Vecht: Alex, coming back to you, you talk a lot to investors, and you mentioned some of the surveys that indicate the growing interest. Are there specific ways that investors are accessing the types of opportunities that Sam is mentioning?
Alex Brazier: Yeah, actually they're accessing them in quite a range of ways. it's quite interesting because consistent with what Sam's saying about emerging markets been overlooked for a period, quite a long period, actually. When we look at a typical multi-asset portfolio in Europe, it's got maybe 9% of its equity in emerging markets. Emerging markets, kind of 12% of the global index. And as Sam says, that doesn't reflect their importance in global output at the same time. And in the US it's only 4% of the portfolio. So, we start from a point where many portfolios across the world. Are under reflective of emerging markets, and that hasn't mattered too much in an environment where, as Sam says, emerging markets didn't go anywhere. But now in an environment where people waking up to it, it's more consequential for portfolios.
So, how are they accessing it? There's a couple of ways. So firstly, it's quite an interesting asset class that only 40% of those we see taking emerging market exposure are doing it with broad indices. So, less than half, and I think this is because of the point Sam makes that this is a really heterogeneous, really dispersed asset class. I mean, what is emerging markets? Quite a big geographically dispersed, as you said, Oscar, very different trends. And so, just buying the broad index is something that less than half of people tend to be doing.
60% tend to look to be more selective, whether they use active investment strategies or whether they use more precise building blocks that they then effectively are active and selective themselves with so it is an asset class where people take their exposure, I would say more carefully than they do in advanced economies and more actively than they do, in advanced economies.
But I think the other thing that's interesting, and building on what Sam was saying about the dispersion, and it goes back to this question about diversification, the other way in which we see people taking their exposure in emerging markets is via hedge fund strategies. And what do I mean by that? I mean taking advantage of this dispersion across emerging markets that Sam's talking about, because this is an environment, and this goes back to the diversification point you raised, Oscar, where stocks and bonds.
Now, no longer so nicely negatively correlated. it used to be in a world where when stocks went down, bonds went up, actually dampened the overall portfolio volatility. No longer so reliable now. And so, what many investors are trying to do is just take down their exposure to overall equity markets and overall bond markets. 'Cause if they don't nicely offset each other, you just want less of them both. And instead, they're looking to investment strategies that don't generate a return by taking a position on the broad market, they generate a return by taking a position on how one thing in the market or a sector in the market is going to move relative to another part of the market. They are market neutral strategies, but they're looking at how relative movements take place. And what those give people is a portfolio that isn't so exposed to broad markets but gives you a return based on these relative moves. And in the context of emerging markets, that's interesting because as Sam says, these are highly dispersed loads of volatility, loads of movement in one part of the market relative to another. And so, they're a historically rich hunting ground for these relative movements, particularly in, in equities.
Oscar Pulido: And your Comment around hedge fund strategies and, the types of strategies that have flexibility to take advantage of dispersion is consistent with what we spoke to Mike Pyle about when we had him on recently on The Bid, where he mentioned that this is a great environment for these kinds of approaches that can generate performance when, there is more movement across asset classes.
Sam, Alex has certainly mentioned that it is worth investors reassessing their allocation to emerging markets. Some of them are starting to do that and, and maybe more will continue to do that. How does that line up with what you're talking to investors about and what have you been telling them about your conviction in emerging markets, not only in 2026, but looking beyond.
Sam Vecht: our conviction is built on spending a lot of time on the ground, in emerging markets. I've been blessed to go to about 80 different countries for BlackRock from Southeast Asia and in sort of Asia that are, mainstream places to places that most investors don't get a chance to go to Syria or Iraq and lots of other places in between. So we see lots of different companies, lots of different countries and it's critical for us to understand what's going on in these places 'cause we're investing in a society, not just in a company. so, when I'm speaking to investors, it's critical for us to get over to those investors that this is a journey. This isn't a three month opportunity, this is a multi-year opportunity, albeit, as we keep stressing, with volatility, and I think, if we look not just through 2026, but through to 2030, I think we're seeing a slightly different world to the world we've experienced for a lot of the last five, 10 years. Whether that's geopolitically, the changes we're seeing in the relations between, let's say the United States and Europe on the one hand, and countries, such as China on the other, whether we're seeing a different economic environment. and what we're seeing with AI is obviously bringing vast change to the types of investments that people want to make.
So, when we get asked, what are we saying to investors, what we're trying to stress to investors is perhaps it's a time to consider emerging markets once again, despite the volatility that people will have to endure. One has to remember that the emerging markets of today, the corporates within the diverse collection of countries are very different to the corporates of 5, 10, 15 years ago, managements have moved on a long way, corporate governance in general, not everywhere has improved, but valuations remain depressed. So, the conversations we're having with investors is, reconsider do your homework and there could be really exciting opportunities.
Oscar Pulido: Well, and Sam, you mentioned that you've been to 80 different countries, over the course of your career, I'm picturing your passport has a few extra pages, attached to it just to accommodate all the stamps. Alex. I know your passport also has a few stamps, I mentioned we last spoke to you in Singapore. I'm sure next time we'll speak to you, you'll be in a different location. But thank you guys for taking us on this tour around emerging markets and thank you for doing it here on The Bid.
Alex Brazier: Thanks for having us.
Sam Vecht: Thank you.
Oscar Pulido: Thanks for listening to this episode of The Bid. Next week I'll be heading to Future Proof Festival in Miami. Not to have a cocktail and lay on the beach, but to learn about why investors are considering new opportunities in private markets.
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