World and emerging markets

Low fees

Recurring costs of 0.22% per year place the portfolio in band B, just above the cheapest band. The emerging-market sleeve adds some cost to the World core, but both remain inexpensive ways to hold equities. This small drag matters over time; it is much less consequential here than the shared equity exposure that drives the crisis result.

The comparison below shows returns after fund fees over the latest year. The difference also reflects the funds’ market exposure; it does not isolate the effect of costs. Dealing charges, spreads and personal tax sit outside this calculation. The larger decision here is the allocation, rather than saving a few more basis points on an already inexpensive portfolio.

Long-term growth

The A for long-term assumptions reflects a small expected compound-growth gap of -0.69 percentage points per year to the model’s growth-optimal mix. Equity-heavy portfolios retain substantial assumed growth, and the imperfect relationship between World and EM can reduce some fluctuations. That helps compounding in the model even though the two holdings remain vulnerable to the same market decline. A high growth grade can therefore coexist with a poor crisis grade.

The efficient frontier combines assumed returns, volatility and correlations. This allocation still sits below it: the model can assemble more efficient combinations from a wider set of assets, including asset classes absent from this portfolio. The grade compares growth with the model optimum; it does not certify that this particular allocation makes the best use of risk or that a larger EM position would improve it.

A strong decade

The historical replay produced 11.95% a year in euros, against 12.45% for World adjusted with money market to the same measured risk. The -0.5 percentage points per year gap earns C: close to the reference, without the outperformance needed for a higher band. Geographic breadth did not translate into a measured efficiency advantage for this allocation over the captured period.

These are reconstructed returns at constant portfolio weights. Asset-class series extend 67.19% of the history because the funds do not have a full observed record over the window. The result describes the allocation’s past behaviour; it cannot establish which region will lead next.

No crash protection

World carries 85 % of the portfolio and remains the main transmitter of the US-equity shock. EM, at 15 %, also loses value in the scenario. The combined -35.22% decline earns D because most of the reference equity loss still reaches the portfolio. The EM tilt changes the regional mix much more than it changes crash resilience.

Neither fund includes an explicit crash-protection strategy. Rebalancing between them restores the equity split and leaves total equity exposure intact. The scenario is a stress test, not a forecast or a maximum possible loss; it provides a starting point for evaluating the portfolio’s resilience.

Shared risks

The expected correlation of 0.72 is high enough for the model to group developed and emerging equities into 1 growth source. Its dominant-source test leaves no expected growth above cash. The C nevertheless credits the broad World core’s spread across companies and sectors. That allowance explains the middle letter; it does not establish an independent return driver. World’s 72.94% US index weight also keeps the portfolio strongly exposed to the US market. [1]

Taiwan represents 28.94% of the broad EM index and South Korea 21.40%. TSMC, Samsung Electronics and SK Hynix are its largest holdings. Their chip businesses add exposure to AI infrastructure alongside the Nvidia, Microsoft and other US technology holdings already in World. Geographic separation therefore leaves an overlapping investment theme. These country weights describe the broad index, not PAEEM’s ESG variant. [2][1]

Points to consider

The B overall grade combines strong expected growth with low costs, but also a D for crises and a shared equity growth driver. It does not establish crash protection. The open questions concern the loss this portfolio can absorb, whether its returns depend too heavily on the same equity driver, and how much independent exposure the EM tilt adds.

1. Capacity for an equity loss

   What would the simulated -35.22% loss mean for the capital invested here? Crash resilience depends on which losses an asset or strategy might offset, its cost in rising markets and the shocks it leaves uncovered. This analysis does not establish which protection approach would fit the investor.

2. Sources of uncorrelated returns

   Which sources of returns could behave differently when US equities or the AI investment cycle struggle? Different economic drivers, behaviour during crises and contributions after fees are useful points of comparison. Adding another fund name alone provides no evidence of an independent return source.

3. EM’s overlap with the AI theme

   Taiwan and South Korea account for 28.94% and 21.40% of the broad EM index, with TSMC, Samsung Electronics and SK Hynix its largest holdings. World already includes Nvidia, Microsoft and other major US technology companies. How much independent exposure does the 15 % EM tilt add alongside that AI theme? The answer depends on PAEEM’s actual ESG-index holdings; the broad-index weights do not establish its composition. [2][1]

Other portfolios

• One World ETF: concentrated in the US, led by big tech
• World, S&P and Nasdaq: three ETFs, shared drivers
• World and money markets: cushioning losses has a cost