This month will mark five years since the Lehman bankruptcy, years that have seen  some changes in pension fund attitudes to risk. Counterparty risk now matters. There is ‘tail risk’.

We know that diversification is trickier than it seems, that corporate bonds are not necessarily riskier than European government bonds, and that emerging economies are in better shape than developed economies.

Most of this is probably permanent, but the thesis about emerging economies and markets has taken an awful battering. EM equities have underperformed developed by 40 percentage points since autumn 2011, and have been routed since world markets started rallying last October. In bonds and currencies, the 11% drawdown in May-July for the JPM GBI-EM Global Diversified index was the worst since 2008-09.  

Dire numbers out of China, protests in Moscow, Istanbul and Brazil, the ‘Arab Winter’. It begins to feel like the EM story is finished.

And maybe it is. But if the tide that floated all boats for 15 years is about to sink a few of them, we should still stay onboard the most seaworthy.

There has been a technical aspect to the sell-off in EM debt: as Treasury yields have jumped, a lot of yield-hunting EM tourists have gone home. More of these flows will come, but the big move appears already to have happened.

More fundamentally, the US current-account deficit is shrinking, taking the world’s supply of dollars with it and threatening balance-of-payment shortfalls. Declining central bank reserves at the Fed indicate that some countries are raiding capital-account surpluses to finance current-account deficits.

Emerging markets, as a whole, have far fewer hard-currency liabilities than they used to, but it makes sense to think about which countries have current-account deficits to finance. Important names include Turkey, India, Chile, Indonesia, Colombia, Poland, Romania and Brazil. Capital account and net foreign assets data are patchy and out of date, but it seems a good bet that Turkey, India, Indonesia, Brazil, Poland and Romania would be on that naughty list, too. By contrast, Malaysia, China, Venezuela and Russia score well on both measures.

Of course, there is the problem of growth – but that’s a global problem, and if Treasury yields and the dollar are on the up, growth is probably looking after itself. The risk premium has increased in response to the volatility of the market regime change, the incipient ‘normalisation’ of interest rates – but the question is, which countries are in the strongest position to cope with this regime change? It feels like the market will begin to differentiate much more than it has during the carry-trade years. But just as counterparty risk still matters, diversification is still difficult, tail risk still exists and government bonds are still risky, it still takes a brave investor to make a long-term case for an underweight in EM equities and bonds.