"Enclosed is a table of the historical performance of MSCI World (representing mostly developed because of sheer market cap weightings) vs. the MSCI EM Asia and MSCI Latin America.

"As can be seen, the 5 yr block performance of Developed markets, going back all the way to 30 yrs, has been decelerating towards near-Zero from a +7% figure. The corresponding figures for Latam and Asia (alas, up to 20yrs only) shows a significant positive.

"It has been said the underperformance of the developed vs. emerging has got to do with the outflows into the bond markets (which have had a near-30yr bull run), if only because those are the biggest cups to collect the overflows, whilst relatively less flowed into the EM-Latam cups, if only because of their sheer smaller sizes.

"Would like to hear your views on what the outlook for these 3 investment pools would look like over the next 5 year block. Pertinently, if the developed block were to go into a zero or negative returns profile?"

Eoin Treacy's view Thank you for the attached table and these interesting questions. I do not believe there are any conclusive answers to these issues but here are some thoughts.

Treasury yields peaked in 1981 as Paul Volcker squeezed inflation out of the system. Treasury prices subsequently began a secular bull market helped by the powerful disinflationary pressures unleashed by globalisation and technological innovations. A large number of emerging markets wholeheartedly adopted capitalism in the 1980s and 1990s which greater contributed to disinflationary pressures. Treasury yields trended lower until Q4 2008 and I believe they are now in a process of base formation development prior to entering a new secular uptrend. If this assumption is correct, then instruments capable of at least keeping pace with rising inflationary pressures either through yield and/or performance are likely to attract a premium over the coming decades.

As a result of globalisation labour, as it applies to low tech manufacturing, has become a fungible commodity. The lowest cost providers of labour, primarily in Asian and Latin American population centres have benefitted enormously from this process. The migration of manufacturing primarily from North America and Europe to Asia and Latin America has put downward pressure on the cost of manufactured goods globally. In tandem, massive technological improvements have further boosted productivity. A number of countries, but China in particular, have pursued incredible capital investment which has helped accelerative development.

The last two decades have also been notable for improvements in economic governance across Asia and Latin America. Despots have been overthrown and democracy vigorously adopted in Brazil and Indonesia. Internal conflicts have been settled in Indonesia. Most countries have embraced fiscal responsibility, actively combated inflation and avoided excessive leverage. A large number have also seen improvements in the rule of law and respect for property rights. China has seen less progress on political reform but has progressed economically beyond all recognition. All of these factors have made Asia and Latin America more attractive to foreign investors. Additionally, these regions have large young populations. When compared to the rapid aging profile of Europe, North America and Japan it is not difficult to gauge where growth is likely to be focused.

I do not find the argument that large cap developed markets have underperformed because of outflows to Treasuries convincing. There are more than enough reasons to explain emerging market outperformance without recourse to such a tenuous view.

The global economy appears to be on a secular growth trajectory. This should be positive for equity markets more often than not, even if inflationary pressures are resurgent. There is no reason to expect developed market returns to dissolve in such an environment but high growth stock markets should outperform.