Economic fundamentals now suggest global investors should be overweight emerging markets versus developed ones, but to get there requires overhauling how indices are used as benchmarks.

Calling this a 10-year process, today the leading benchmark providers’ indices are backward-looking and their technical specifications prevent investors from getting sufficient exposure to those markets offering the most economic growth, says Vincent Camerlynck, London-based global head of institutional sales at BNP Paribas Investment Partners.

“Global investors need to accept that emerging markets involve volatility and there are road blocks to full access,” he says. “Everyone wants exposure to the emerging-market consumer story, but it is not a linear growth story.”

Saying the term ‘emerging markets’ is out of date; “they’ve emerged,” says Camerlynck. He acknowledges they all have liquidity constraints, because their capital markets lack depth and breadth compared with developed ones. This means they remain vulnerable to hot inflows of money.

Part of the solution is, of course, for the bigger members of the EM club to develop their capital markets. Another part lies with educating global institutions about how to play the EM story.

Camerlynck thinks this means moving away from global mandates to regional ones. (BNP Paribas Investment Partners’ strategies tend to be local or regional; it is still developing an overarching strategy for global emerging market portfolios.)

“To understand China, Brazil or India requires a lot of homework,” Camerlynck says. “Institutional investors are moving from aggregate exposures to getting a local understanding, and that will lead them to be more comfortable with investing into regions or single countries.”

Among the firm’s European investors, he sees demand for emerging-market debt or other debt instruments with high yields. “Inflation, perhaps in 2014 or 2015, is in the back of investors’ minds,” he says.

There is also a rapidly growing demand for alternative investments, particularly those with an inflation hedge, such as real estate and infrastructure. He also sees more investors adopting active currency strategies to add returns.