“Emerging markets,” a term coined nearly 30 years ago, no longer doesjustice to a category of investments that cover a wide array of asset classes and countries, according to a white paper from Standish Mellon Asset Management Company LLC, the fixed income specialist for BNYMellon Asset Management.

“We believe the term emerging markets‟ is a deficient investment concept as it is inconsistent and vague,” says the paper‟s author, Dr. Alexander Kozhemiakin, managing director and senior portfolio manager at Standish.

“Traditional divisions between so-called developed and emerging markets are blurring, as some countries in the former category display higher levels of risk and a more serious degradation offundamentals than countries in the latter.”

The Standish report proposes a new concept of “assets tied to economies of risky countries,” or “ASTERISCS.” It better conveys the appeal and risks of emerging markets and allows for the inclusion of markets of developed countries that start behaving as emerging, the report says.

A glaring example of the failure of the term “emerging markets” is that it simultaneously refers to markets as well as countries, according to the report. This can cause confusion, the report said, as a single country can have multiple markets, such as equities, bonds, currencies, real estate, each with different characteristics.

It is possible that a country classified as ‟emerging‟ can have a relatively mature, liquid market,” Kozhemiakin says. “Conversely, the presence of mature, liquid markets does not necessarily mean that a country in which they are operating is risk-free.”

The vast majority of country risks are linked to the same factors that explain why certain countries are not yet rich, defined by gross national income (GNI) per capita, according to the report.

However, rich countries can also become risky, if they are confronted with an external threat, or face high domesticpolitical risk, or suffer from major debt sustainability problems, the report notes.

Impaired creditworthiness is a country risk because default on public debt is a systemic event that has the potential to negatively affect the performance of all asset classes tied to the economy of that country, Kozhemiakin says.