Actively invested in emerging markets and Asia
Solutions across the spectrum
A range of long-term tailwinds support emerging markets (EMs). They include a demographic advantage over the West, manufacturing capabilities, resource advantages, digitisation and a focus on developing infrastructure.
Emerging markets: Why now?
EMs account for 82% of the world’s population but currently only 24% of global market capitalisation.
World population:
- EM
- DM
World growth:
- EM
- DM
World economy:
- EM
- DM
World cap:
- EM
- DM
- Developed markets
- Emerging markets
Source: Bloomberg as at November 2022
Decarbonisation, tech innovation, demographic shifts. We take a look at the long-term megatrends reshaping the investment landscape in some of the world’s fastest-growing economies.
AN EMERGING OPPORTUNITY:
Four key attributes of emerging markets
The growth story:
- The growth differential between emerging and developed markets is likely to widen in favour of emerging countries on the back of positive demographics, limited supply side constraints, industrialisation, resource advantage, on-going reforms and infrastructure development.
The commodities story:
- Historically, EMs’ reserves of commodities mean they tend to outperform in periods of above-trend inflation. This is particularly relevant with current geopolitical pressures driving demand for energy-related commodities and green metals.
The inflation question:
- Many EM governments have addressed the challenge of inflation more effectively than their developed market peers. Many emerging countries have become more resilient against its effects, meaning more fiscal room to boost their economies.
Valuations:
- EMs continue to trade at a valuation discount considerably larger than the historical average. In emerging market debt, vulnerability to a strong dollar is being addressed by a transition from dollar-denominated to local currency debt.
The attraction of Asia
Huge opportunities lie in emerging markets’ key geographic region
Asia enjoys a range of structural advantages that potentially make the region more resilient than developed economies in the face of growing cyclical and structural economic headwinds.
Our EM solutions
Whether you’re interested in broad exposure to emerging markets or want to focus on a particular aspect of the emerging market opportunity, our product range provides the flexibility to invest in EM with a range of preferences in mind.
GLOBAL EMERGING MARKETS
Global Emerging Markets Equity
Delivering holistic long-term returns through investing in structural thematic trends
Global Emerging Markets SMID Equity
Applying the GEMs philosophy to the small- and mid-cap universe
Global Emerging Markets ex-China Equity
Applying the GEMs philosophy to EM opportunities beyond China
ASIA EX-JAPAN
Asia ex-Japan Equity
Employing a contrarian investment style to drive long-term returns
China Equity
Applying a contrarian investment style to China equities
EMERGING MARKETS DEBT
Emerging Markets Debt
Delivering alpha through our expertise in a misunderstood market
Why Federated Hermes?
Our understanding of EMs is reflected in our approach to managing risk, capturing value and engaging effectively with companies to maximise the potential long-term returns for our clients.
Managing risk
- While emerging markets offer a high degree of opportunity, we recognise that this is often accompanied by a higher level of associated risk. When making investment decisions, we carefully factor in market-specific issues such as geopolitical tensions, political stability, and regulatory structures, as well as more temporary concerns such as China’s Covid policy or the issues in its property market.
Capturing value
- Emerging market assets tend to trade at a discount, but even so not everything in EM is cheap, or even good value. We conduct thorough bottom-up fundamental analysis of potential assets before deciding whether they are of interest for our portfolios. At the same time, we determine a target price at which the asset represents a good investment.
Engaging effectively
- We engage widely across emerging markets, addressing a range of environmental, social, and governance (ESG) issues. We believe this level of active engagement reduces risk and improves the potential for stronger returns from the companies we invest in.
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