China and the Future of Equity Allocations

Jun 12, 2019

With the partial inclusion of China A shares in the MSCI ACWI and Emerging Market Indexes, institutional investors are reconsidering how Chinese equities fit into their global and emerging-market portfolios. In this paper, we analyze and contrast different ways of configuring policy benchmarks, considering two broad options: an “integrated option,” with China as an indispensable part of a wider equity opportunity set; and a “dedicated option,” where China is treated as a separate equity segment, similarly to U.S. equities. No matter which route investors choose, A-share inclusion may significantly impact their approach to asset allocation and portfolio implementation.