Global Emerging Markets Equity

Reasons to invest

Truly active management

A concentrated portfolio with a high active share, invested with a long-term perspective.

Multi-cap

Investing across the market-cap spectrum.

From top to bottom

A top-down framework to identify countries with conditions supportive of growth. And bottom-up analysis to discover quality companies trading at attractive valuations.

Responsible owner

Investing in companies throughout cycles as an active owner and partner, we maintain a regular dialogue and encourage strong environmental, social and governance (ESG) practices.

Quality and safety

Buying quality companies at a discount can provide a margin of safety in a volatile asset class.

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Overview

We use a long-term approach to identify the winners from structural changes in emerging economies: high-quality, efficient and sustainable companies.

Kunjal Gala

Lead Portfolio Manager, Emerging Markets

Why Global Emerging Markets Equity?

Identifying winners of structural change

Long time horizon

Opportunistic

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.

Local emerging market investors typically look out six to 12 months, and thus are more oriented to news flow, quarterly earnings and short-term catalysts. As a result, companies can be mispriced due to transitory issues. This can create opportunities for investors who are able to focus on the long term. We are long-term oriented, which aligns us with company management.

We seek to take advantage of short-term weakness in high-quality companies or mispricing in average companies. While today the portfolio is positioned in quality stocks with a growth bias, we are beholden to neither growth nor value, meaning we have the flexibility to invest where we believe the best opportunities are.

How we invest

Fundamental approach

Seeking discounts to intrinsic value

ESG integration

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 supportive of growth, provide the best investment opportunities.
Investing in lower-quality, significantly mispriced companies can be a catalyst for the realisation of value.
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

Idea generation

Fundamental analysis (including ESG)

Portfolio construction

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 identify approximately 200 companies for a watchlist.

We pay particular attention to the following investment criteria:

Quality	Value with catalysts	Margin of safety
Structural drivers	Avoiding unsustainable sections	Proven business models
Moats/defensible franchises	Structural drivers	Strong balance sheet
High ROE	Moats/defensible franchises	Good governance
Consistency of, and improvements in, revenue and earnings	Large discount to intrinsic value	P/B justified with strong or improving ROE
	Improving revenue, margins, cash flow generation	Low PEG ratios
	Stable/improving regulation	An improving cycle or, at least, the trough of a 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. We combine this with the analysis of operational, financial and ESG risk factors to estimate the intrinsic value of the company.

We believe concentrated portfolios are best equipped to maximise risk-adjusted returns. Typically, we hold 50-75 companies in a portfolio, with the top 20 holdings accounting for more than 40% of the portfolio.