Emerging Market Nerd Alert!....

Wilshire backs 19 emerging mkts for Calpers funds

...as Austin Powers might say in a Las Vegas hotel room.

This story talks about 19 emerging markets that have passed some sort of screen that allows CALPERS to invest in them if the managers deem them worthy.

This is real top down stuff, at least my notion of top down. One of the reasons Austria (I realize this is not an emerging market) was one of the top performing markets in 2004 is because a portion of the country's pension went into stocks. This created a demand for equities that pushed most stocks higher regardless of fundamentals (not an endorsement to ignore fundamentals).

The CALPERS fund is $177 billion. I don't know the specifics but it is not crazy to think the fund might have a 5% allocation to emerging markets (if anyone who works at CALPERS reads this blog and want to weight in...) or just a hair over $8.5 billion. I would imagine that countries like China, Mexico and Singapore are already greenlighted for investment. Maybe what will happen is that $2-$3 billion will work its way into some of the 19 new countries, seems reasonable anyway.

If my numbers are anywhere close to right we could see a real lift in some emerging markets very soon.

The obvious question is which ones? I wish I knew but I think you have a good chance of capturing this, if it even happens, by having exposure to eastern Europe and Latin America or a broad fund.

Its important to realize the point of this article is to share process nothing else. Long time readers know that I and my clients have diverse exposure to emerging markets.