Investing in global equities is no longer about a small number of big developed markets, but rather investing in sound global companies where location is irrelevant, according to Andrew McMenigall, an Edinburgh-based global fund manager at Aberdeen Asset Management.
"Features often associated with the emerging world -- large debt, low savings and part nationalised banks -- are now evident in the developed world, while the global bargaining power of emerging markets has grown with large surpluses, high savings levels and capital autonomy," says McMenigall.
Regions which were victims rather than catalysts for the credit crisis will be the first to recover, and emerging markets will account for an increasing share of the world's largest companies, he says.
He notes, however, that this underlying structural change still means investors should not look at specific countries but at individual companies when investing internationally.
"Where a company resides has become irrelevant, it is what the company does and how it performs that should be of primary concern for investors," he says. "We should be careful of the labels we apply. Where a company is located has less and less to do with what it sells or who its customers are."
McMenigall cited the top 15 stocks in the UK, only one of which generates the majority of its revenue from the UK market. The remaining 14 are global companies with revenue in multiple markets.
Rather than focus on traditional price-to-earnings ratios, Aberdeen also recommends investors focus on price-to-book ratios when looking at company valuations.
"As earnings have collapsed in the last 18 months, price-to-book gives us a truer indication of the company valuation and whether it is fair value," McMenigall says.
Despite recent surges on global equity markets, Aberdeen sees continuing volatility still ahead for investors.
"While we have emerged from the abyss, global markets will remain volatile while the battle between deleveraging and liquidity unfolds," McMenigall says. "In this environment, it's important that investors remain cautious and not chase stocks, but remain alert to opportunities presented by future volatility."