LEX 
Drop in on any chief investment officer in the western world: while the accents change, the refrain doesn’t. Money managers enthuse about a gradual transfer of power from developed to emerging economies. Investors seem to be buying it. First quarter net inflows into emerging-markets funds were $3.2bn, versus net outflows in developed markets of $59bn, according to EPFR, which tracks about $11,000bn in total assets. The FTSE All-World Emerging equity index is up 8 per cent this year, versus a 7 per cent fall in the Developed.
Decoupling, in short, is back. But does this kind of geographic diversification actually work as an investment strategy? Historically, no. The relationship between the Emerging and Developed indices has steadily strengthened since the early 1990s. For the five years before the Asian crisis, the average correlation was roughly 0.4. Since April 2004, it has been 0.85. Continuing that trajectory, the markets will be in perfect sync by the end of next year.
