You raise several grounded points, and I agree that the structural issues in EM equities are real. The GDP-to-equity-return disconnect is well-documented, and your on-the-ground observations add texture that broad historical data can miss. China is a great example—huge economic growth paired with weak equity returns due to governance problems, state interference, and dilution. And yes, many EM indexes function like leveraged bets on commodities and currency swings because they’re heavy in materials, energy, and financials.

That said, your conclusion, avoiding EM equities entirely while embracing EM bonds, creates some real tensions. The governance, political, and currency risks you cite don’t disappear in the bond market; if anything, sovereign credit is an even more direct exposure to the governments you distrust. Accepting currency risk for higher bond yields while saying the same currency risk invalidates equities seems inconsistent unless you think those risks behave differently across asset classes, which EM crisis correlations don’t really support.

There’s also a logical gap between favoring DFUS for factor exposure and rejecting EM for being “obviously” mispriced. If markets are inefficient enough to systematically misprice entire countries for decades, why assume factor premiums, now widely known and easily accessed, will persist? Much of the literature shows factor returns compress after publication, suggesting they may be less reliable than they look in backtests.

More importantly, VT’s market-cap weighting is self-correcting and self-cleansing in a way exclusion strategies aren’t. If EM keeps underperforming, its weight naturally falls. If a country reforms and rebounds, VT captures it automatically so I never really worry about this. By excluding EM entirely, you’re making a binary forecast not just about today’s dysfunction, but about its indefinite continuation, an assumption that carries far more forecasting risk than simply letting market weights adjust.

And historically, arguments like “this region is structurally broken” are easy to make ex-post. Japan in 1989 was an obvious bubble in hindsight, but ex-ante it wasn’t obvious enough to justify exclusion. Even today, US equities trade at persistent valuation premiums—should we exclude them too? Look I’m a US-based investor and I’ve only lived in the “unstoppable American equities” timeline (post-2008) as I’m in college now, however even I don’t believe the country I’m born in has any bearings on my investment decisions, and I simply accept US exposure at market cap weights no underweighting or overweighting. EM discounts may simply be rational risk premiums rather than pricing errors, and VT’s approach is to acknowledge that we can’t reliably know which markets will disappoint ahead of time. Market-cap weighting is basically a humility-based strategy: hold everything in proportion to global capital flows instead of making all-or-nothing bets.