Emerging markets have long carried the stigma of being the high-beta trade: exciting on the way up, punishing on the way down, and hopelessly correlated to whatever was happening on Wall Street. That narrative is increasingly out of date. Beneath the headline indices — which are heavily distorted by a handful of tech-adjacent names in Korea and Taiwan — lies a more interesting story: robust domestic economies, superior earnings growth, cheaper valuations, and, perhaps most surprisingly, lower volatility.

Consider the MSCI Emerging Markets index. Nearly 10% of it is a single stock, TSMC in Taiwan. Add Samsung and SK Hynix in Korea, and you have a concentration problem that looks more like a leveraged bet on the global semiconductor cycle than a diversified exposure to developing economies. Since June 2025, the EM index rose roughly 14%, but around 9 percentage points of that came from Korea alone, and within Korea, largely from two memory stocks riding the AI infrastructure wave. Strip those out, and what remains tells a very different story.

Managers who explicitly exclude Korea and Taiwan, focusing instead on domestically-driven consumption economies across Latin America, South Asia, and parts of Africa, have delivered earnings growth of around 25% per annum over the past three to four years. The consensus expectation is for that pace to continue. Compare this to the S&P 500's historical 5% EPS CAGR, or even the Nasdaq's 7%, and the gap is striking.

What makes the picture even more compelling is the risk side of the equation. These same domestically-focused EM strategies have exhibited annualised volatility of around 7%, less than half the Nasdaq's 16.5%, and comfortably below the S&P 500's 12%. The old pattern of EM catching pneumonia when the US sneezed has weakened considerably. These economies are increasingly dancing to their own tunes, driven by internal demographics, local consumption, and intra-regional trade. South America and Eastern Europe and Southeast Asia each respond to different drivers. That's genuine diversification, not the correlated kind investors thought they were getting a decade ago.

Plotted against valuation, the case sharpens further. Emerging markets trade at roughly 11x forward earnings, barely half the multiple commanded by the S&P 500 at 21x. You're getting materially higher growth at materially lower prices, with less day-to-day volatility. That's the top-left corner of any risk-return chart: the place you want to be.

Of course, there are caveats. The quality and sustainability of those earnings needs scrutiny, are they truly domestic, or ultimately still tethered to Western demand? That work is ongoing.

Interestingly, a parallel question is emerging closer to home. The recent carnage in SaaS and software-as-a-service stocks, driven partly by fears that AI coding tools can now replicate bespoke software in weeks rather than years, has left valuations across the sector significantly compressed. Whether that represents opportunity or a more permanent re-rating is not yet clear. The incumbents still hold distribution, client relationships, and infrastructure that cannot be rebuilt overnight. But if the moats really are narrowing, some of that capital may well rotate toward the parts of the global market where growth is real, valuations are honest, and the old assumptions no longer apply. Emerging markets could be one such destination. And/or it’s a once in a decade buying opportunity in big and not so big tech? We’ll report back in a couple of weeks since we have kicked the tires of a few of the growth juggernauts that have come under pressure recently.