The strategy earns an Above Average Process rating for its flexible, risk-averse approach. It seeks to damp the volatility typically associated with emerging-market equities by investing a share of the portfolio in developed-market firms that derive significant revenue from emerging economies and, more recently and to a lesser extent, developing-market debt.
Management’s revenue-centric approach to investing means that results are driven more by emerging markets’ growth than might otherwise be the case. The team believes that while emerging markets are expanding faster than developed markets, emerging-market firms aren’t necessarily the best way to capitalize on that growth. In some cases, developed-market multinationals may be better positioned. Firms with at least a fifth of their revenue or assets attributable to the developing world are fair game here, provided at least 45% of the strategy’s assets are invested directly in emerging-market-domiciled securities.
At the beginning of 2026, the firm moved the strategy’s prospectus benchmark to the MSCI Emerging Markets Index from the MSCI ACWI, which it had long used. This change should have minimal impact, according to the firm, as the managers maintain a bottom-up approach focused on identifying the most compelling opportunities, regardless of domicile. Developed-market holdings remain part of the toolkit when they offer superior prospects.
American Funds’ multimanager system lets the strategy’s 12 named managers play to their strengths. Each runs an independent sleeve of the portfolio, which enhances diversification and further mutes overall volatility. Currency exposure is typically hedged only when risks appear elevated.
Since the strategy’s 1999 inception, it has on average kept more than a third of its assets in developed-market stocks (excluding South Korea and Taiwan). There’s been a fair amount of variability in that stake, though. Developed-market equity exposure has increased since bottoming at roughly 20% in June 2005. As of December 2025, that weighting stood at 41.6% thanks in part to its US exposure, while the strategy’s emerging-market equity stake by domicile was 54.2% (including Korea and Taiwan). Judged by revenue sources, however, the strategy has more emerging-market exposure. As of December, the portfolio received about 64% of its revenue from the developing world.
The portfolio holds less in East Asian stocks than the MSCI Emerging Markets Index. It has been significantly light in South Korea and Taiwan. While the strategy’s China allocation has grown over the past decade, its 13.1% stake was much lower than the index’s 22.4% as of December 2025. Most notably, the strategy has underweighted technology giants, such as Taiwan Semiconductor and Samsung, and Chinese companies Tencent and Alibaba, which top the index.
The strategy’s previously sizable bond sleeve has shrunk. From mid-2008 to 2015, bonds absorbed between 8% and 17% of assets. Since then, however, the fund’s fixed-income sleeve has declined to less than 4%, recently clocking in at 2.8%.