Key Takeaways
Emerging markets are no longer just banks, materials, and energy. Internet platforms, cloud adoption, and tech-enabled consumer services are quietly reshaping the opportunity set.
Traditional EM indices may underrepresent growth, which helps explain long-term underperformance versus U.S. equities.
Targeted ETFs focused on EM internet and growth stocks offer a different exposure profile than broad benchmarks.
Single-stock leveraged ETFs introduce daily compounding and path dependency, making them tools for aggressive, volatility-aware investors.
Position sizing and volatility management matter far more in EM and single-stock strategies than in traditional developed-market allocations.
Emerging markets have spent years wearing the label of “old economy” investing. Heavy exposure to banks, materials, and energy has caused broad EM benchmarks to lag U.S. equity indices that became increasingly dominated by growth and technology stocks. According to Brendan Ahern, Chief Investment Officer at KraneShares, that structural imbalance has masked a major shift already underway inside emerging markets.
In a recent episode of Lead-Lag Live, Ahern joined host Melanie Schaffer to discuss how internet platforms, AI adoption, and e-commerce are changing the EM growth narrative, and how investors can think about accessing that opportunity without relying solely on traditional benchmarks.
The Growth Gap Inside Emerging Markets
Ahern explained that broad EM indices historically allocated significant weight to slower-growth sectors, which partly explains why emerging markets have trailed U.S. equities for more than a decade. Over that same period, U.S. indices increasingly reflected technology and growth-oriented business models.
To address this mismatch, KraneShares developed ETFs designed to isolate the growth factor inside emerging markets, rather than replicating the full index structure. By focusing on internet platforms and tech-enabled consumer businesses, these strategies aim to capture areas of EM that more closely resemble the drivers behind U.S. equity leadership.
Why Internet Platforms Matter
Many of the most dynamic EM companies operate digital platforms that benefit from expanding middle classes, rising smartphone penetration, and rapid adoption of online services. Ahern highlighted companies such as Alibaba, JD.com, Pinduoduo, and MercadoLibre as examples of businesses that may be underrepresented in traditional allocations, despite playing a central role in EM consumer growth.
From his perspective, these companies represent a “tip of the spear” approach to emerging markets, emphasizing secular growth trends rather than legacy sector exposure.
Understanding Single-Stock Levered ETFs
The conversation also addressed the mechanics and risks of single-stock leveraged ETFs. Ahern stressed that these products are designed to deliver a multiple of a stock’s daily performance, not its long-term return. That daily reset creates path dependency, meaning the sequence of returns can significantly affect outcomes over time.
Because of this structure, single-stock leveraged ETFs require a different mindset than traditional long-only investments. They are tools for investors who understand volatility, monitor positions actively, and size exposure appropriately.
Volatility, Risk, and Portfolio Fit
Ahern was clear that emerging markets and single-stock strategies carry higher volatility than developed-market indices. Regulatory risk, geopolitics, currency movements, and macro uncertainty all play a role. As a result, he emphasized the importance of volatility-adjusted position sizing and using these strategies as smaller components within a diversified portfolio.
These products are not designed to replace core holdings, but rather to complement them for investors with higher risk tolerance and a clear understanding of drawdowns.
The Bigger Picture
After years of U.S. equity dominance, Ahern noted that valuation differences, sector composition, and currency dynamics may be shifting the relative opportunity set. His view is not about abandoning U.S. equities, but about recognizing that growth is increasingly global and that emerging markets now offer more targeted ways to access it.
For investors willing to look beyond traditional benchmarks, the evolution inside emerging markets may be far more advanced than headline performance suggests.
As always, this discussion is for educational purposes and not investment advice.
Lead-Lag Live is part of The Lead-Lag Report, where we spotlight conversations that cut through the noise — separating market fantasy from fundamental truth.
DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of KraneShares and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
