• What are emerging markets?

• Why invest in emerging markets?

• Xtrackers emerging markets ETFs at a glance

• FAQs

Emerging markets are countries whose economies have grown beyond the status of developing countries but have not yet reached the level of industrialised nations. These countries often exhibit above-average annual growth rates, increasing industrialisation, and rising living standards. According to the International Monetary Fund (IMF), emerging and developing economies are expected to grow at a rate above 4% in each of 2025, 2026 and 2027, materially outpacing advanced economies, where growth is projected to remain closer to 1.5–2% over the same period.^[1]

Emerging markets are often characterised by a growing middle class and more favourable demographic profiles, factors that can support longer-term economic expansion. India is a prominent example, with a median age below 30, compared with markedly older populations in industrialised economies such as Germany, Japan, or the United States (see chart “Emerging and developed countries differ in demographics and growth dynamics”). Beyond India, countries including China, Taiwan, Brazil, and South Korea represent some of the most economically significant emerging markets, albeit with very different growth drivers and development paths.These countries have followed very different development paths—from serving as low-cost manufacturing hubs, to resource-driven economic policies, to technology- and innovation-led growth models. Although emerging and developing countries account for around 60% of global GDP measured in purchasing power parity terms, they are not represented at all in many global indices such as the MSCI World Index.^[2] This is due to country classifications used by index providers such as MSCI, which divide global markets into four categories: Developed Markets, Emerging Markets, Frontier Markets, and Standalone Markets.

Investing in emerging markets can offer potential benefits. On the one hand, it may improve portfolio diversification by reducing dependence on individual economic regions—particularly industrialised countries such as the United States. In addition, emerging markets can go through growth cycles that differ from those of the rest of the world, further reducing dependence on global economic conditions.
Historically, growth rates in emerging markets have often been higher than in developed economies (see table “Emerging and developed countries differ in demographics and growth dynamics”), which could have a positive impact on equity market returns.^[3] However, companies from developed markets also often benefit from emerging market growth, as many sell their products and services globally. At the same time, it is important to be aware that investments in emerging markets can involve increased risks.

Investing in emerging markets involves specific risks that you should consider before investing:

• Volatility: Equity and bond markets in emerging markets can exhibit higher volatility than those in developed countries.^[10]
• Political risk: Political instability and unpredictable regulatory changes can negatively affect markets.^[11]
• Currencies: Emerging market currencies are considered particularly volatile and sensitive to US interest rate levels, which can create additional risks for euro-based investors.^[12]
• Liquidity: Capital markets in most emerging markets are less developed than those in industrialised nations, which can affect trading and associated costs.^[11]
• Corporate governance: Shareholder rights, anti-corruption measures, and reporting transparency may be at a lower level compared with developed markets.^[11]

For long-term investments, some of these risks may be less significant, as short-term fluctuations can balance out over time.

Broadly diversified exposure to emerging markets

Emerging markets ETFs provide access to emerging markets without requiring you to select individual stocks yourself—assuming these are even tradable on European exchanges. ETFs that track global emerging market indices such as the MSCI Emerging Markets Index allow investors to participate cost-effectively in the performance of the most important emerging equity markets.
Xtrackers ETFs offer broad diversification across regions, sectors, and hundreds of companies. Weightings are based on free-float market capitalisation, meaning larger companies receive a higher weighting. Broadly diversified emerging markets ETFs can be used as a portfolio complement and as a separate allocation to equity markets outside the developed world—for example, alongside an MSCI World Index ETF.
In addition, investors can target specific emerging market regions, such as Asia or Latin America, via regional ETFs. These can be particularly suitable if you want to assign greater importance to certain regions in your portfolio while maintaining diversification within that region.

*Xtrackers MSCI Emerging Markets Swap UCITS ETF will be subject to a fee waiver, not of a permanent fee cut: for a period starting March 1st, 2026 until December 31, 2026, part of the fee of the Xtrackers MSCI Emerging Markets Swap UCITS ETF will be waived and the TER will temporarily be reduced to 0.12%. At the end of the stated period the share classes may charge the full TERs again (0.49% and 0.18% respectively) as announced in the prospectus.

Targeted investment in individual emerging market equities

If you want to manage the weighting of individual emerging markets in your portfolio more precisely, you may consider ETFs that track country-specific indices. Examples include ETFs focused on equities from China, India, Brazil, South Korea, or Taiwan. These country ETFs typically represent the largest listed companies in each respective market, although their scope and composition may vary depending on the index and local market conditions.

Country-specific ETFs can be a useful addition if you want more control over regional allocations without relying on the country weights in broadly diversified emerging markets ETFs, which can change over time due to market developments. This flexibility allows for more precise portfolio construction based on individual market views, but it comes with lower diversification and therefore higher risk.

Emerging market bonds as an alternative to developed market bonds

In addition to equity ETFs, emerging market bond ETFs can also contribute to portfolio diversification. The Xtrackers ETF range provides access to government bonds from various emerging markets, either broadly diversified across multiple countries or targeted at individual markets such as China or India.

Emerging market bonds often offer a yield premium compared with bonds from developed countries, as investors seek compensation for higher political and economic risks. However, emerging market bonds also have a higher risk profile than developed market bonds. Additional factors such as currency and political risks can lead to higher volatility, while also offering potentially higher interest income and diversification effects.

These ETFs can be integrated into existing portfolios or used to build a new portfolio, depending on individual objectives. With emerging market equity and bond ETFs, you can actively manage your exposure to dynamic growth markets—either broadly diversified across multiple countries or focused on individual markets.