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Gee Vix!

Weekly investor research

30 May 2017

Historically it has been very profitable to buy EM during major risk-off episodes in developed economies, i.e. events that push the VIX index up by 10 points of more. Brexit was such an event and EM’s performance following Brexit was no different from the past with strong positive performance across the board. We find that all EM sub-asset classes performed better than their historical averages in the ten months since Brexit. The only exception was the least risky Investment Grade sub-asset classes. This suggests that investors can do better by investing in high yield credit, stocks and local currency, when the sources of risk are explicitly due to events in developed markets (as opposed to EM).

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