For nearly a decade, investors have steadily increased their allocations to emerging markets in order to tap into higher economic growth, rising commodity prices, and a weakening U.S. dollar. Expectations of a rising middle class and an eventual 'decoupling' of EM growth from the over-indebted, developed world were pervasive. Recently, however, commodity prices have weakened and the U.S. dollar has strengthened, challenging much of the original thesis for emerging markets.

Going forward, successful investing in emerging markets is likely to warrant a heterogeneous approach, differentiating between the winners and losers as the global economy continues to rebalance.

July 2013

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