NIZAM HAMID<br /><strong>HEAD OF SALES STRATEGY, iSHARES EUROPE</strong><br /><br />AS THE global economy begins the slow path to recovery, investors are starting to take a view on economic growth. Oddly, perhaps, emerging markets have been ahead of advanced economies in exiting recession. Over the first half of 2009, equity markets around the world have restored part of the value lost in 2008. But emerging markets have rallied much more than developed markets. In particular the MSCI Emerging Markets index rose by almost 38 per cent as at the end of June, while the MSCI World Index increased by only 7.7 per cent.<br /><br />Traditionally, emerging markets have been seen as a riskier investment. But the economic crisis might have changed that. In the recent turmoil, emerging markets and markets in the more advanced economies experienced similar levels of volatility and risk, which may mean that there is less of a difference in terms of the risk-reward. For example, the one-year rolling beta &ndash; a measure of the volatility, or systematic risk, of a security or a portfolio compared to the market &ndash; of the MSCI Emerging Markets to MSCI World fell from about 1.3 in early 2007 to around 0.9 in the second quarter of 2009.<br /><br />Investing in emerging markets can give investors exposure to the higher growth areas of the world. But it can be expensive to own shares in emerging economies, not to mention the foreign ownership restrictions in place in some countries. Exchange-traded funds (ETFs) offer an efficient and low cost method of accessing these markets directly.<br /><br />ETFs give easy and diversified access to such equities but, as with all investments, there are risks involved. ETF investors can choose either a regional index such as the MSCI EM Eastern Europe or focus on a specific country. That said, investors should be aware that emerging market ETFs do still come with a higher element of risk. They are also by their very nature not as well structured as developed markets. But that&rsquo;s all part of an investor&rsquo;s risk-reward calculation.