Global Emerging
Markets SMID Equity
Investing in tomorrow’s blue chips, today.
Reasons to invest
Finding structural growth opportunities
Attractive valuations
Truly active management
Long-term track record
Responsible owner

Small and medium sized companies (SMIDs) in emerging markets are an under-researched area that present the opportunity to find hidden gems.
Why Global Emerging Markets SMID Equity?
Emerging markets are undergoing rapid change: urban development and technological revolutions are increasing standards of living and creating a growing middle class. Trends such as digitisation, electrification, biotechnology and cyber security present exciting opportunities to identify the winners of structural change.
Analyst coverage of the SMID market in emerging markets is limited, financial disclosure is less extensive and management teams can be less experienced or poorly served by financial advisers. This presents opportunities to dive deep into financial fundamentals, informed by ESG, and discover hidden gems.
In our experience, domestic emerging market SMID investors are often too focused on short-term developments and news flow. The long-term nature of the Strategy and its focus on structural growth opportunities enables us to look through short-term market fluctuations and seek compounding returns.
How we invest
We apply an integrated bottom-up and top-down fundamental approach. Key to generating alpha is our ability to identify ‘quality’ businesses trading at attractive valuations. We believe this approach can outperform in most market conditions given its focus on fundamentals with a top-down framework.
Our blended strategy seeks to take advantage of short-term weakness in high-quality companies and mispricing in average companies. We search for stocks that trade at a significant discount to our assessment of their intrinsic value. The portfolio manager will also maintain a margin of safety both in terms of quality and price.
ESG analysis and engagement are integrated into our bottom-up approach through the inclusion of ESG considerations in our research process. We also employ best-in-class engagement at the company and country level for a comprehensive view of both risks and opportunities.
Investment philosophy
We believe:
- Structural changes in the world economy are transforming emerging markets.
- The winners that emerge from this transformation will be efficient and sustainable businesses.
- This is a long-term trend requiring a long-term approach.
- Quality companies trading at attractive valuations, in countries with conditions that are supportive of growth, provide the best investment opportunities.
- In addition, we are not averse to investing in lower-quality companies where they are significantly mispriced and where we can determine a catalyst for value to be realised.
- The best way to add value for investors is through a process that integrates top-down analysis with bottom-up fundamental stock selection, augmented by ESG analysis and engagement.
Investment process
Ideas are generated from a variety of sources, including meetings with company management, our global network of contacts, broker research, industry analysis and quantitative screens.
A proprietary quantitative model ranks companies on valuation, quality, and momentum factors. This screen assigns favourable scores to quality companies with a stable shareholder base and a strong management team.
We pay particular attention to the following investment criteria:

Quality | Margin of safety |
---|---|
Moats/defensible franchises | Proven business models |
Improving cash flow generation | Strong balance sheets |
High ROE | Good governance |
Consistency of, and improvements in, revenue and earnings | P/B justified with strong or improving ROE |
Stable/improving regulation | Low PEG ratios |
Improving cycle |
We seek to establish a company’s financial health and long-term prospects. We model financial forecasts (one- and five-year earnings), cash flow and balance sheet. This is combined with the analysis of operational, financial and ESG risk factors to estimate the intrinsic value of the company.
We aim to hold 80-110 companies in a portfolio. In stock selection, potential long-term outperformers are emphasised. Position sizes are determined by a number of factors, including conviction levels, the degree of upside to ‘fair value’, liquidity, contribution to active risk, ESG rating, country and sector exposures. We initiate positions at typically 50bps and build them incrementally with conviction. Individual stock positions are limited to a maximum 10%.
Team

Vivek Bhutoria, CFA
Co-Portfolio Manager, Federated Hermes Limited

Kunjal Gala
Head of Global Emerging Markets, Lead Portfolio Manager, Federated Hermes Limited
Product Information
For the latest performance and vital information – including prices, key facts, identifiers and ratings
Our Purpose
To deliver Sustainable Wealth Creation
Like all our investment capabilities, Federated Hermes Global Emerging Markets SMID Equity aims to deliver Sustainable Wealth Creation: the generation of wealth through investments that enrich investors, society and the environment over the long term.
Our business provides three equally powerful pathways to achieving this aim. Federated Hermes Global Emerging Markets SMID Equity features in the Active ESG route.
Responsible, active investing for long-term performance.
- Financial objective
- Best-practice integration of ESG analysis and engagement insights
- Some capabilities may enforce exclusions that reflect Portfolio Managers’ investment views
- Delivery of sustainable outcomes through effective stewardship
Federated Hermes Global Emerging Markets SMID Equity
Mission-led investment strategies to create positive impact.
- Financial and impact objectives
- Best-practice integration of ESG analysis and engagement insights
- Focus on companies generating impact or undergoing positive transformation
- Some capabilities may enforce exclusions that reflect defined sustainability values, impact considerations, or both
- Delivery of sustainable outcomes through effective stewardship
Thematic and values-based approaches for sustainable outcomes.
- Financial and sustainability objectives
- Best-practice integration of ESG analysis and engagement insights
- Exposure to sustainability themes
- Exposure to ESG leaders and industry exclusions that reflect sustainability values
- Delivery of sustainable outcomes through effective stewardship