Why Your Emerging Markets ETF Isn't Actually Diversifying You | Young Jae Lee, Pictet

Young Jae Lee is a Senior Investment Manager at Pictet Asset Management — a Geneva-based firm founded in 1805, still owned by its managing partners 220 years later, and one of the largest asset managers in Europe. Young Jae joined Pictet in 2010, spent his first seven years covering emerging market technology as an analyst, and now runs the strategy behind RISE — the Pictet Emerging Markets Rising Economy ETF.

In this episode, Young Jae walks through a fundamental problem with how US investors get emerging market exposure today. The MSCI Emerging Markets benchmark is more than 70% Korea, Taiwan, and China. Its top five holdings — TSMC, Samsung, SK Hynix, Tencent, Alibaba — mirror the same technology-heavy concentration as the top five names in the S&P 500. Buying a passive emerging market fund alongside a US portfolio, he argues, doesn't diversify — it amplifies the risk you already have.

RISE was built to solve that problem. The fund invests only in emerging market countries where the working-age population is growing, which structurally excludes Korea, Taiwan, and China and shifts the portfolio into India, Brazil, South Africa, Indonesia, Mexico, and others. Young Jae explains the demographic thesis grounded in the Solow Growth Model, why he calls population growth in emerging markets structurally equivalent to what AI is in developed markets, and how the fund's 60% quantitative screen and 40% fundamental conviction sleeve are designed to work together. He also drops one of the more surprising statistics you'll hear on the show — that more than half of the MSCI EM benchmark's total return has historically come from dividend yield — and explains why that reframes the case for value investing in emerging markets.