Investment Strategy In Emerging Markets

Emerging markets offer investors the best long-term growth opportunities, but risk and volatility can be high. Many strategists prefer emerging-market stocks because they are less risky than developed-market equities. Emerging market equities offer higher returns on investment and higher returns on equity than developed markets. [Sources: 4, 17]

Emerging markets – Market economies may have relatively unstable governments and economies based on few industries. Compared to developed economies, emerging markets are more likely to pedal and may experience renewed political and economic uncertainty. Many of these risks are even greater when investing in emerging markets. [Sources: 9, 10, 13]

We cannot say when business will resume, but we can say with conviction that the strategy is very well placed if it does. Emerging markets can be very volatile and the timing of your investment is very important. Growth in emerging markets is not stable, and investment in them is long-term. [Sources: 11, 12]

The strategy continues to invest heavily in emerging markets, in sectors that correspond to the likely paths that the best economies can take. This includes frontier markets, as these economies offer some of the best growth and diversification opportunities in the world. [Sources: 1, 11]

For example, Coca-Cola’s earnings mix reflects the fact that it is popular in China and Japan, and that buying US equities – investment funds in the United States – can help you invest in emerging markets while addressing the evolving stability of the market. Alternatively, you could invest in companies based in emerging markets and listed outside the UK. When we see how to start investing in emerging markets, it may be worth investing directly in individual companies to find investment potential with high returns. The diligent investor can invest directly and explore companies in their respective markets. [Sources: 8, 9, 12]

The faster growth and the highest – declining – stocks are in the fastest growing economies such as China and India. Dividends are also an important part of emerging markets investment strategy, which is strongly linked to emerging and developing economies “growth, as dividends boost trust in companies. The more certain you are about what is happening in different countries, the more resilient you will be when you see a large emerging market being sold – and the higher the return. But, if basic caution is exercised, the benefits of investing in emerging markets can outweigh the risks. [Sources: 12, 17, 18]

Emerging market investors should also be aware of the risks and volatility associated with currency fluctuations. Investing in emerging market bonds can complement investing in equities, as bonds are generally portrayed as more stable and less volatile than other types of investments, such as equities and bonds. [Sources: 0, 9]

Investments in emerging markets may be subject to additional risks not associated with investments in more developed countries, such as currency fluctuations, political instability, and economic instability. International investment in emerging markets could create an additional risk associated with foreign exchange rates, foreign-exchange fluctuations, and currency depreciation. [Sources: 6, 7]

You can invest directly in listed companies based in emerging markets, in broad emerging market ETFs, or more specifically in a broad portfolio of emerging market companies. In general, emerging-market growth strategies in terms of market capitalization will invest in the companies with the largest market capitalization in their countries. One should also be aware of the particular risk considerations associated with investment in more developed countries, such as currency fluctuations, political instability, and economic instability in emerging economies. [Sources: 9, 16, 17]

Emerging markets are something of a sweet spot for quantum, and while advanced-country investors are doing better – as with emerging-market allocations – there is also a good chance that developing-country investors will do well in the long run – markets are investing. [Sources: 14, 18]

In a recent webinar hosted by Funds Europe, Datta talked about how quant investment can be applied to emerging markets and how certain strengths of quant strategies can be compared to a more traditional approach to fundamental investments. I have always been very interested in some of the investment factors that are prevalent in emerging markets, “said Datta. [Sources: 18]

The Fund’s investments in foreign securities carry additional risk compared to US securities, while investments in emerging market securities generally carry even higher risk. Global emerging markets strategy typically holds about 10% of its portfolio in the United States and will be relatively focused on the US. While the emerging markets equity strategy primarily invests in companies headquartered in markets that are included in MSCI’s Emerging Markets Index (as defined by MMSI), up to 10% of the portfolio can be invested in frontier markets and / or frontier-based companies, whereas an emerging markets growth strategy can generally invest in equities and bonds of companies from other countries outside emerging markets. [Sources: 2, 3, 5, 16]

Emerging markets have a higher downside risk than developed markets, taking into account all relevant risk characteristics. Adding emerging-market growth to the portfolio is a sensible strategy for risk-mitigation for long-term investments in the United States. [Sources: 12, 15]

Sources:

(0): https://www.fortpittcapital.com/investing-in-emerging-markets/

(1): https://www.globalxetfs.com/a-new-path-for-emerging-market-investing/

(2): https://www.coronation.com/us/global-investment-strategies/emerging-markets-equity/

(3): https://www.guggenheiminvestments.com/mutual-funds/fund/ryiex-emerging-markets-bond-strategy

(4): https://www.thinkadvisor.com/2020/07/13/gmo-5-reasons-to-own-emerging-market-stocks-now/

(5): https://www.barrowhanley.com/product/1344/emerging-markets?type=V

(6): https://investments.miraeasset.us/mutual-funds/emerging-markets-fund

(7): https://gqgpartners.com/strategies/emerging-markets-equity/

(8): https://www.schwab.com/resource-center/insights/content/emerging-markets-what-you-should-know

(9): https://www.ig.com/en/trading-strategies/how-to-invest-in-emerging-markets-191219

(10): https://cppinvest.com/emerging-markets-fund/

(11): https://www.vaneck.com/ucits/blog/emerging-markets-equity/looking-beyond-covid-19-investing-in-the-future-of-emerging-markets-today

(12): https://www.investopedia.com/articles/basics/11/should-you-invest-emerging-markets.asp

(13): https://www.calamos.com/insights/volatility-opportunity-guide/understanding-emerging-markets-volatility/

(14): https://www.eurekahedge.com/Research/News/902/Emerging-Markets-To-Hedge-or-Not-to-Hedge

(15): https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID3127422_code331701.pdf?abstractid=3127422&mirid=1

(16): https://www.dsmcapital.com/emerging-markets-growth/

(17): https://www.lynalden.com/invest-in-emerging-markets/

(18): https://www.funds-europe.com/digital-advertorials/why-emerging-markets-are-a-sweet-spot-for-quant-investing

Focused On The Frontier: Acadian Asset Management’s Asha Mehta Uncovers The Right …

Mehta, a CFA charter member, is a lead portfolio manager with Boston-based Acadian Asset Management. A Goldman Sachs alumna, Mehta’s work …

As a portfolio manager with an eye on the emerging and frontier economies, Asha Mehta has what may would say is an insiders view on what global investors are seeing and thinking as they source opportunities–not just alpa–in markets not necessarily making major headlines. The BRIC nations–Brazil, Russia, India and China–still garner much attention, but many others, including Nigeria, Egypt, Argentina to name a few, are no less relevant in the eyes of those who see opportunity within smaller and newly evolving markets.

Mehta, a CFA charter member, is a lead portfolio manager with Boston-based Acadian Asset Management. A Goldman Sachs alumna, Mehta’s work today is focused on quant strategies with a thematic focus on the emerging and developing economies. Sustainability, which she explains arises more and more these days in investor conversations, is also an area she and a team at Acadian are focused on.

Her focus on the frontier economies has taken her around the globe and not only for client requests. Having carried out microfinance work in India (where she can trace family roots), she holds a keen perspective on developing economies and the unique and often dynamic situations present in many of them.

With an MBA from The Wharton School (University of Pennsylvania), Mehta is keen on financial literacy and is today active in numerous organizations that seek to educate and empower women. Girls Who Invest and 100 Women In Hedge Funds are a few of the organizations she uses as a forum to leverage her unique investing skills to a broader demographic.

Asha sat down with me earlier this year to talk emerging markets and where, in a period of slowing growth and rising global debt, the opportunities may be. She has become well-known as a go-to expert not only for razor-sharp quant strategy, but as plugged in portfolio manager with her ear to the ground across the frontier markets. She touched on her upbringing, what drives her and her work, and and the ongoing allure of the markets that today many still shy away from.

What keeps you so interested in the frontier markets and why?

Frontier and emerging economies have transformed in recent decades with vast improvements in not only economic measures but human development ones as well. Global integration has driven this development, and it’s been a lifelong ambition of mine to be part of the change.

My maternal and paternal families came to the US from various impoverished countries (India, Russia and beyond). They escaped both violence and poverty and came to the US for stability and opportunity. As a child, I traveled often to my father’s home in rural India. I did my first solo trip there at age 4, where I learned to sleep on outdoor cots on dusty summer nights, to eat naan bread cooked on an open fire, and to learn customs by attending school alongside my cousins.

At the age of 10, on a return journey, I was struck by the advantages my US upbringing afforded me with my rickshaw driver, who while hauling my large family and our suitcases through poorly-lit gravel paths, let me know that he, too, was ten years old. Following that, in my academic programs at Stanford and Wharton, I studied International Development.

As today’s frontier countries emerge, I find it both fascinating and rewarding to participate in their development. I see the public markets as a vehicle to drive capital to well-run business, to encourage transparency and accountability, and to fairly and efficiently distribute wealth. In addition, as these markets liberalize and attract investment, they offer a very compelling opportunity for international investors.

What makes Acadian unique?

Acadian is a pioneer in public markets investing. We were early entrants into emerging market and non-US small cap stocks decades ago. I joined the firm in 2007, at which point we were the first to launch an institutional Frontier strategy. We have been on the leading edge (sometimes the bleeding edge) since in accessing remote, less trafficked markets. More recently, we were early to launch a China-A strategy that invests across the entire onshore market.

Acadian is also unique because of our systematic investment approach. While we invest in stocks with strong fundamentals like other traditional managers, we apply our insights through a quantitative lens. This model-driven approach enables us to cover 40,000 stocks across the globe and into the frontier.

Along with breadth, our approach also affords buy-sell discipline in these retail-driven, volatile markets; our inherent multi-factor analysis accounts for frontier risk drivers like country-specific themes and high transaction costs that result from characteristically low liquidity.

Do you find it difficult when discussing these markets with investors? What’s the pitch?

Frontier markets have emerged as an investable asset class for several reasons: improved economic stability resulting from lessons learned from emerging markets’ crises, the formation of the WTO that broke down global barriers and supported trade, and the emergence of the communication age that allows analysts, traders and PMs to communicate with each other within seconds.

Many global investors approach frontier markets with an excitement for their exotic qualities–they are intrigued by the potential of these rapidly growing countries with large populations that are increasingly educated and integrated and that offer a demographic dividend with a growing consumer class. Vietnam is a case example, with a strong economy supported by both growing domestic demand and foreign direct investment (FDI). It is important to note that with these more nascent markets comes heightened volatility as a result of issues such as perceived corruption, autocracy and regulatory intervention – These can sometimes dissuade investors from investing in frontier markets.

Acadian is also unique because of our systematic investment approach. While we invest in stocks with strong fundamentals like other traditional managers, we apply our insights through a quantitative lens.

Ultimately, investors who allocate to this asset class believe these markets can offer meaningful opportunity from both a beta and alpha standpoint. Beta-wise, the markets will grow via earnings expansion (capitalizing on domestic demand and global free trade), multiple expansion, and capital deepening.

Active management can seek to further deliver possible outsized returns given the inefficiency of these markets. Further, we can potentially deliver a lower volatility profile as country risks are idiosyncratic and offer offsetting effects in a diversified portfolio. While corruption and governance is a concern, we find that frontier markets, perhaps surprisingly, score no worse than their emerging market peers.

Have you seen investor interest remain the same or dip or rise over the years? What do you think keeps global investors interested in these markets?

Investor interest has risen substantially since the formation of the asset class a decade ago and stabilized more recently. As many investors are looking to go passive in their portfolios, frontier markets investing may offers a particularly inefficient asset class where active management may be able to generates net-of-benchmark active returns.

Also because frontier market drivers are distinct from those in the more mainstream markets, the frontier return profile is less correlated to developed and emerging markets; this provides diversification in a broad asset allocation plan.

Pedestrians shop at a busy Balogun Market in Lagos, Nigeria, Tuesday, Sept. 5, 2017.

Going forward, frontier markets are going through an evolution, as many large markets have been upgraded to EM status. These countries include UAE, Qatar, Pakistan, Argentina and Saudi Arabia. The markets that are left outside of Developed and Emerging Market indices constitute a very small portion of investable markets.

Given this, investors will be re-defining how they characterize a frontier market to likely include small emerging market countries. While this classification may generate some confusion for benchmark-sensitive investors, it is likely that the core characteristics (growth, inefficiency, uncorrelated return) will remain.

What do you believe is the long-term appeal of frontier markets such as Vietnam, Mozambique and some Gulf states?

These countries have both short-term and long-term opportunity.

In the nearest term, our outlook for Saudi Arabia in H1 2019 is very strong. The country has liberalized substantially over the last few years as it targets its Vision 2030. For the first time, Saudi will be included in mainstream emerging market benchmarks in 2019. Passive and active equity investors will increase their exposures as a result, resulting in substantial market appreciation opportunity.

Likewise, we see meaningful opportunity for Vietnam to benefit from global flows as its economy develops. This country is a darling of the Frontier Markets, given rapid growth, limited sociopolitical risk and economic orientation. Further, the market is both broad and deep, providing an attractive environment for active stock picking.

Mozambique is a longer term story. The country has significant growth potential over the long-term but is still in the early stages of its emergence. It remains nearly uninvestable given limited breadth and liquidity.

Around Frontier Markets, Select Opportunity Exists

More than a dozen African countries are scheduled to hold elections this year. What risks do you see on the continent?

Our long term outlook for Africa is positive, but over the next year, key risks relate to macroeconomic considerations. In West Africa, the largest investable market is Nigeria, where elections are now complete, despite sociopolitical risk particularly around the voting delay, currently the key risk relates to oil, both the price itself as well as whether there will be production disruptions as well as the price of oil.

In East Africa, we continue to be concerned about Zimbabwe’s newly established currency and the country’s capital controls. While Kenya’s private sector is thriving, we are concerned about high valuations in this low liquidity market as well as the unfavorable regulatory environmental for the financial sector. In both countries, the central bank will play a significant role in transitioning these countries toward the next wave of growth.

South Africas’s May election is on the horizon. What should investors be ready for? Are there risks surrounding an ANC fracture or Ramaphosa loss?

We anticipate volatility into the upcoming South Africa election. While a Ramaphosa victory would offer the President a mandate to enact the reforms and structural changes that the economy needs, the South African economy remains weak. We find few positive drivers of return, given the weak macro environment, slow growth among South African corporates, meaningful volatility, and potential for a credit downgrade. A Ramaphosa loss or ANC fracture would introduce additional uncertainty and risk.

Among the other countries that will be voting this year, where do you see the most opportunity for global investors?

With Nigeria’s election behind them, we do see some risks. However, Nigeria is among the more liquid African markets, and there are technical drivers that could lead a rally in the second half of this year. For example, the country’s risk profile has driven valuations to quite attractive levels, with many Frontier countries “graduating” from the frontier benchmark to emerging. Longer term, investors will be watching the impact of President Buhari’s anticorruption initiatives, enacted in his prior term; while these efforts have had a modest impact recently, an improving transparency backdrop would be beneficial as corporates return to growth.

Short-term and long-term, are any of the countries on the [African] continent a good bet this year?

We believe North Africa broadly is poised for potential opportunity. Our view is driven by both technical elements, including the coming liquidity rotation among international investors, and fundamental considerations, as we believe Egypt is competitive in the current macro environment and Morocco offers exposure to what we believe to be high quality companies.

Illustration: Alexandra-Compain Tissier, Paris

Research Suggests Bitcoin Adoption Growing Organically in Emerging Markets

Many of its proponents argue that the greatest impact Bitcoin will have on society will be in developing nations. The belief is that the current most …

Many of its proponents argue that the greatest impact Bitcoin will have on society will be in developing nations. The belief is that the current most popular permissionless and non-government-correlated asset will one day allow for those in emerging markets to access banking-like services to connect the billions around the world lacking them with a global economy.

Whilst such arguments make Bitcoin irresistibly virtuous to some, outside of theoretical musings, there has been little to suggest that such an adoption is actually happening yet. However, recent research indicates that emerging markets are rapidly getting into Bitcoin and their buying patterns suggest that their interest lies in more than simply speculation.

Bitcoin Adoption: The Haves Speculate Whilst the Have Nots Survive

According to research conducted by Passport Capital, the trading volume at Local Bitcoins in emerging markets now far exceeds that in developed markets.

At @PassportCapital we continue to observe a divergence between LocalBitcoins volume in Developed and Emerging Markets. Volume in Developed Markets is tracking price (speculation) while volume in Emerging Markets has stabilized and is growing despite price (utility ) pic.twitter.com/RuOtGCWa0X

— Passport Capital (@PassportCapital) April 3, 2019

For the study by Passport Capital, used data from Coin.Dance, along with MSCI classifications to determine which nations fell into which market category. As you would expect, much of Europe, North America, Australia, Japan, Singapore, and New Zealand fell are deemed developed markets.

Meanwhile, Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, UAE, China, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Taiwan, and Thailand, fell into the category of emerging markets. A third classification – frontier markets – is also defined by the MSCI but appears to have been ignored by Passport Capital. This may be due to the lack of Local Bitcoins availability in many “frontier market” nation states.

Interestingly, Local Bitcoins volume in emerging markets first overtakes that in developed markets in early 2017. After spending the first two quarters of the year with similar trading volumes, those observed at the peer-t0-peer Bitcoin marketplace site in poorer nations seriously outperformed developed markets at the tail end of 2017 and have done ever since.

Whilst it is encouraging to see emerging markets accounting for such a large percentage of peer-to-peer trading, the figures themselves do not reveal too much about the actual adoption of Bitcoin in such markets versus the developed world. This is because there are so many more options available for those with bank accounts and access to dedicated digital assets trading platforms.

However, what is particularly fascinating about the research conducted by Passport Capital is that interest in trading at Local Bitcoins in developed nations seems to follow price whilst the volume figures from emerging markets has grown in recent years, even as price has declined. This suggests that buyers in richer parts of the world are simply speculating on the asset, whilst those living in emerging nations are actually using it.

Following the massive spike in price and trading Local Bitcoins trading volume at the end of 2017, the interest in buying using the marketplace has fallen until very recently in developed markets. Conversely, after a brief pullback, the interest in using the service in emerging markets has grown steadily since early 2018. This, according to Passport Capital, suggests usage outside of pure speculation.

Likely uses for Bitcoin in such nations include using it to access a wider digital economy where banking infrastructure is likely, or as a means to opt-out of the economy of a nation in times of financial or political turmoil.

Related Reading: Is Largely Unbanked Africa Primed for Bitcoin Adoption?

Featured Image from Shutterstock.

VN looks to achieve emerging market status

In June last year, Việt Nam’s equity market failed to be added to Morgan … According to Bảo Việt Securities Co (BVSC), regarding Việt Nam’s stock …
Viet Nam News

HÀ NỘI — Viet Nam’s securities market has plenty of opportunities to be promoted from a frontier market to an emerging market this year.

In June last year, Việt Nam’s equity market failed to be added to Morgan Stanley Capital International’s (MSCI) watch list – the US independent provider of research-driven insights and tools for institutional investors, for classification review for a possible lift from a frontier market to an emerging one.

However, according to the latest report released by the State Securities Commission (SSC), Việt Nam almost meets MSCI’s quantitative requirements to be added onto its watch list for a possible future upwards reclassification.

The country has seven stocks that have satisfied MSCI’s quantitative requirements in terms of market size and liquidity.

Việt Nam has 22 stocks that meet MSCI’s requirement in capitalisation of US$1.59 billion, including the Asia Commercial Bank (ACB), dairy firm Vinamilk (VNM), real estate developer Vingroup (VIC), consumer staple Masan Group (MSN) and steel maker Hoà Phát Group (HPG).

Regarding capitalisation of the circulating stocks, MSCI set out a standard of 797 shares for the emerging market. Việt Nam has 16 enterprises that meet the standard, including ACB, Saigon Hanoi Commercial Joint Stock Bank (SHB), ceramic firm Viglacera Corporation (VGC), PetroVietnam Technical Services Corporation (PVS), Vinamilk (VNM), Vingroup (VIC), Masan (MSN) and Hoà Phát (HPG).

Việt Nam has 276 enterprises that have stock liquidity equal to 15 per cent of ATVR (Annualised Traded Value Ratio), which is also a criterion MSCI sets out for an emerging market.

Essentially, Việt Nam’s securities market had satisfied MSCI’s quantitative requirements in terms of market size and liquidity, SSC said.

However, it was the qualitative condition that is the decisive factor for an upgrade, not only by MSCI but also by other classification firms, such as FTSE and S&P, it added.

According to Bảo Việt Securities Co (BVSC), regarding Việt Nam’s stock market, MSCI recognised an improvement for the “investor registration and account set up” criterion, while maintaining the assessment for all remaining criteria (including nine requirements for improvement).

“In general, from our view, the results of the MSCI review indicate slow improvement in Việt Nam’s stock market. Even in comparison to the two frontier markets in the region which are Bangladesh and Sri Lanka, Việt Nam still needs to improve the most,” BVSC said in a recent report.

According to SSC, there were several major factors that led to the result, including the lack of openness to foreign investors, few English-language issuances of information disclosures made by local companies and problems with the trading mechanism.

Foreign capital inflow

Although the direction of foreign capital inflow is becoming increasingly unpredictable in 2018 due to many external factors, experts say that Việt Nam is still an attractive destination for foreign investors.

Last year, a wave of foreign investors’ capital was withdrawn from emerging markets to shift towards the US market due to the increasing attractiveness of the US dollar but Việt Nam faced a somewhat better situation than its counterparts such as Indonesia, Thailand and the Philippines.

Dominic Scriven, Chairman of fund management company Dragon Capital, quoted a recent survey indicating that in the first half of last year, foreign investors withdrew $5.6 billion from the Thai market, $3.7 billion from Indonesia and $1.6 billion from the Philippines.

Meanwhile, according to data from Vietcombank Securities Company (VCBS), foreign investors still net bought nearly $1.8 billion on the Vietnamese stock market.

According to VCBS, regardless of the general withdrawal trend of foreign capital in emerging markets, cash flow from countries such as Japan and South Korea into Việt Nam was still trending upwards.

FTSE’s watch list for upgrade

In its annual country classification review published late September last year, the UK-based financial and business information firm FTSE Russell (FTSE) said Việt Nam “is currently classified as a Frontier market and is being added to the watch list for possible reclassification as Secondary Emerging market.”

Therefore, according to Việt Dragon Securities Corporation, Việt Nam’s market may be upgraded to the emerging market status by FTSE in 2020 as it requires at least one year for FTSE to seek advice from the international investment community and another year for investment firms to prepare for the changes and portfolio restructuring.

Following the upgrade, a wave of passive capital (investment that tracks a market-weighted index or portfolio) of $300 million will be poured in to the Vietnamese market, VDSC forecast.

The new amended draft law on securities, supposed to be submitted to the Government in the second quarter of 2019 and submitted to the National Assembly for consideration and approval in the fourth quarter of 2019, was also expected to help bolster the review process for the Vietnamese market, it added. — VNS

MSCI Equity Indexes February 2019 Index Review

MSCI Global Standard Indexes: Seventeen securities will be added to and … MSCI US Equity Indexes: There will be no securities added to and one …

LONDON–(BUSINESS WIRE)–Feb 11, 2019–MSCI Inc. (NYSE:MSCI), a leading provider of research-based indexes and analytics, announced the results of the February 2019 Quarterly Index Review for the MSCI Equity Indexes – including the MSCI Global Standard, MSCI Global Small Cap and MSCI Micro Cap Indexes, the MSCI Global Value and Growth Indexes, the MSCI Frontier Markets, and MSCI Frontier Markets Small Cap Indexes, the MSCI Global Islamic and MSCI Global Islamic Small Cap Indexes, the MSCI Pan-Euro and MSCI Euro Indexes, the MSCI US Equity Indexes, the MSCI US REIT Index, the MSCI China A Indexes and the MSCI China All Shares Indexes. All changes will be implemented as of the close of February 28, 2019. These changes have been posted on the Index Review web page on MSCI’s web site at https://www.msci.com/index-review.

MSCI Global Standard Indexes: Seventeen securities will be added to and one security will be deleted from the MSCI ACWI Index. In the MSCI World Index, the three largest additions measured by full company market capitalization will be Adyen N.V. (Netherlands), KKR & Company (USA) and Altice USA A (USA). The three largest additions to the MSCI Emerging Markets Index measured by full company market capitalization will be Foxconn Industrial Internet Company A (HK-C) (China), Meituan Dianping B (China) and Xiaomi Corporation B (China).

MSCI Global Small Cap Indexes: There will be one addition to and eight deletions from the MSCI ACWI Small Cap Index.

MSCI Global Investable Market Indexes: There will be 16 additions to and seven deletions from the MSCI ACWI Investable Market Index (IMI).

MSCI Global All Cap Indexes: There will be three additions to and two deletions from the MSCI World All Cap Index.

MSCI Frontier Markets Indexes: There will be two additions to and no deletions from the MSCI Frontier Markets Index. The two additions to the MSCI Frontier Markets Index will be Kazatomprom GDR (Kazakhstan) and State Bank of Mauritius (Mauritius). There will be no additions to and one deletion from the MSCI Frontier Markets Small Cap Index.

MSCI Global Islamic Indexes: Twenty-nine securities will be added to and 13 securities will be deleted from the MSCI ACWI Islamic Index. The three largest additions to the MSCI ACWI Islamic Index measured by full company market capitalization will be Adobe (USA), EssilorLuxottica (France) and Intuit (USA). There will be four additions to and one deletion from the MSCI Gulf Cooperation Council (GCC) Countries ex Saudi Arabia IMI Islamic Index.

MSCI US Equity Indexes: There will be no securities added to and one security deleted from the MSCI US Large Cap 300 Index.

One security will be added to and one security will be deleted from the MSCI US Mid Cap 450 Index. The addition to the MSCI US Mid Cap 450 Index will be Conagra Brands.

One security will be added to and no securities will be deleted from the MSCI US Small Cap 1750 Index. The addition to the MSCI US Small Cap 1750 Index will be Range Resources Corporation.

There will be no additions to and no deletions from the MSCI US Micro Cap Index.

For the MSCI US Investable Market Value Index, there will be no additions or upward changes in Value Inclusion Factor (VIFs), and no deletions or downward changes in VIFs. For the MSCI US Investable Market Growth Index, there will be no additions or upward changes in Growth Inclusion Factors (GIFs), and no deletions or downward changes in GIFs.

MSCI US REIT Index: There will be one addition to and no deletions from the MSCI US REIT Index. The addition to the MSCI US REIT Index will be Essential Properties Realty Trust.

MSCI China A Onshore Indexes: There will be four additions to and no deletions from the MSCI China A Index. The three largest additions measured by full company market capitalization to the MSCI China A Index will be Aluminum Corp Of China A, SDIC Capital Company A and Caitong Securities Company A. There will be no additions to and one deletion from the MSCI China A Small Cap Index.

MSCI China All Shares Indexes: There will be nine additions to and no deletions from the MSCI China All Shares Index. The three largest additions measured by full company market capitalization to the MSCI China All Shares Index will be Meituan Dianping B, Xiaomi Corporation B and Pinduoduo ADR A. There will be no additions to and five deletions from the MSCI China All Shares Small Cap Index.

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It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third party investable instruments (if any) based on that index. MSCI does not issue, sponsor, endorse, market, offer, review or otherwise express any opinion regarding any fund, ETF, derivative or other security, investment, financial product or trading strategy that is based on, linked to or seeks to provide an investment return related to the performance of any MSCI index (collectively, “Index Linked Investments”). MSCI makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment returns. MSCI Inc. is not an investment adviser or fiduciary and MSCI makes no representation regarding the advisability of investing in any Index Linked Investments.

Index returns do not represent the results of actual trading of investible assets/securities. MSCI maintains and calculates indexes, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the index or Index Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to be different than the MSCI index performance.

The Information may contain back tested data. Back-tested performance is not actual performance, but is hypothetical. There are frequently material differences between back tested performance results and actual results subsequently achieved by any investment strategy.

Constituents of MSCI equity indexes are listed companies, which are included in or excluded from the indexes according to the application of the relevant index methodologies. Accordingly, constituents in MSCI equity indexes may include MSCI Inc., clients of MSCI or suppliers to MSCI. Inclusion of a security within an MSCI index is not a recommendation by MSCI to buy, sell, or hold such security, nor is it considered to be investment advice.

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MSCI receives compensation in connection with licensing its indexes to third parties. MSCI Inc.’s revenue includes fees based on assets in Index Linked Investments. Information can be found in MSCI Inc.’s company filings on the Investor Relations section of www.msci.com.

MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except with respect to any applicable products or services from MSCI ESG Research, neither MSCI nor any of its products or services recommends, endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s products or services are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include MSCI Inc., clients of MSCI or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research. MSCI ESG Research materials, including materials utilized in any MSCI ESG Indexes or other products, have not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body.

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PUB: 02/11/2019 05:34 PM/DISC: 02/11/2019 05:34 PM

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