Asset owners need to actively determine what their exposures to China’s fast-growing equity universe should be, rather than relying on emerging markets benchmark indexes providing limited access now to some of the mainland’s most compelling alpha and diversification opportunities, according to Acadian Asset Management LLC.

The $113 billion Boston-based quant manager’s Dec. 16 paper, “Polarizing Views: China’s Impact on Emerging Markets Investing,” calls on institutional investors to review and revamp their allocations to China, unconstrained by benchmark weights, based on their “particular objectives and geopolitical views.”

Illustrative of what Acadian sees as problematic choices by benchmark providers is China’s 31% weighting in MSCI Inc.’s widely followed Emerging Markets Investable Market index — sharply below the money manager’s estimate that Chinese stocks comprise 53% of foreign investors’ emerging markets opportunity set.

The gap reflects MSCI’s decision to include only 20%, for now, of the capitalization of China’s A-shares market for stocks listed in Shanghai and Shenzhen — the broadest offering of Chinese companies tied to surging domestic demand, with a retail investor base that amplifies alpha opportunities for professional investors.

Another active decision the paper cites as debatable is the continued benchmark inclusion of corporate giants from relatively advanced economies, such as Seoul-based Samsung Electronics Co. Ltd. and Hsinchu-based Taiwan Semiconductor Manufacturing Co., leaving those indexes more concentrated while diminishing their diversification benefits.

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