Despite record inflows into emerging market equities in 2009, Standard Life stated there was not enough evidence prove that emerging markets will outperform developed markets in the near term.

Recent data shows that emerging market indices have hit headwinds after strong gains in 2009. For example, the Morgan Stanley Capital International BRIC Index, shows total annualised returns over one year of 104 per cent. However, since January this year, returns have been negative, at -0.08 per cent. By comparison, the MSCI World Equity Index of major developed economies shows one-year returns of 65 per cent, but since the start of January, it has gained, at 1.56 per cent.

Standard life warns of several traps for investors when examining GEM (global emerging markets) equities. First is the importance of looking at each country individually as the countries will have different situations and futures. Next, investors assume superior returns from GEM equities, when in practice these markets have underperformed during certain time periods.

In addition, equity valuations are justified on the faster growth of emerging economies. However, in practice there is little relationship between real growth in gross domestic product and stock market performance in both GEM and developed markets, according to research done by the London Business School.

“It is certainly the case that there are important structural drivers such as an expanding middle class supporting consumer spending, and more market friendly economic and monetary policies, that will support GEM equity markets going forwards. However, our analysis shows that when current valuation signals were seen in the past then near term returns from GEM equities have been no better on balance than their developed economy counterparts” said Andrew Milligan, head of global strategy at Standard Life Investments in a statement.

Standard Life Investments’ preference in accessing the emerging markets is through companies listed in developed economic blocs that are better regulated and more liquid as stated by Mr Milligan.

Standard Life Investments is one of the UK’s biggest asset managers with a total of almost £139 billion (around $210.7 billion) of assets under management as of the end of last year.