Market concentration is not just a hallmark of the big tech-dominated S&P 500 index; it has increasingly become a feature of investing in emerging markets (EM), too.
Investors tracking the MSCI Emerging Markets Index will have an outsized exposure to the technology sector. If your passive EM equities fund mirrors this common benchmark:
- You hold 15.5% of your portfolio in just one stock: Taiwan Semiconductor Manufacturing Company (TSMC). 1
- Your top 10 holdings account for 38.1% of your portfolio, with six of these names—TSMC, Samsung Electronics, SK Hynix, Mediatek, Delta Electronics, and Hon Hai Precision Industry—all coming from the technology sector and collectively representing almost one-third of your portfolio (32.1%).
- Your overall technology sector exposure will be 40.8%, not including tech-related companies classified in other sectors, such as Alibaba Group and Tencent.
EXHIBIT 1
Sector Breakdown of the MSCI Emerging Markets Index
Source: MSCI. Data as of 31 July 2026.
Structural Shifts Driving Concentration
This concentration within the flagship EM equity index has been driven by big structural shifts: Taiwan’s technological dominance, led by the chip-making giant TSMC; China’s shrinking index weight after its underperformance versus other emerging markets in recent years; and the rise of mega-cap quality businesses in the semiconductors and internet sectors, in part fueled by the current massive wave of spending on data centers and other AI-related infrastructure.
Go Active in EM for a Wider Set of Opportunities
Attractive relative valuations, a positive outlook for many emerging economies, and strong earnings growth underpin our optimism that EM equities can prolong their recent momentum.
By looking beyond the largest benchmark constituents and drawing on bottom-up fundamental research, we believe an active approach can tap into the broader and diverse opportunity set provided by the EM universe, uncovering companies and countries whose fundamentals may be under-represented in the index while avoiding risky big bets on single stocks or sectors.
Investors should know what they own and understand that allocating passively to EM equities can represent very narrow exposure to what is otherwise a broad and highly diversified asset class replete with investment opportunities.
Featured
Important Information
Published on 25 August 2026.
1 Source: MSCI. Data as of 31 July 2026.
The performance quoted represents past performance. Past performance does not guarantee future results.
Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its affiliates (“Lazard”) to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change.
Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “intent,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events may differ materially from those reflected or contemplated in such forward-looking statements.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy.
This document reflects the views of Lazard Asset Management LLC, Lazard Frères Gestion or its affiliates (“Lazard”) based upon information believed to be reliable as of the publication date. There is no guarantee that any forecast or opinion will be realized. This document is provided by Lazard for informational purposes only. Nothing herein constitutes investment advice or a recommendation relating to any security, commodity, derivative, investment management service, or investment product. Investments in securities, derivatives, and commodities involve risk, will fluctuate in price, and may result in losses.
Certain assets held in Lazard’s investment portfolios, in particular alternative investment portfolios, can involve high degrees of risk and volatility when compared to other assets. Similarly, certain assets held in Lazard’s investment portfolios may trade in less liquid or efficient markets, which can affect investment performance.
Past performance does not guarantee future results. The views expressed herein are subject to change, and may differ from the views of other Lazard investment professionals.
This document is intended only for persons residing in jurisdictions where its distribution or availability is consistent with local laws and Lazard’s local regulatory authorizations. Please visit www.lazardassetmanagement.com/global-disclosure for the specific Lazard entities that have issued this document and the scope of their authorized activities.
The MSCI Emerging Markets Index is a free-float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The MSCI Emerging Markets Index consists of emerging markets country indices including: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates.
The index is unmanaged and has no fees. One cannot invest directly in an index.