Emerging Markets Equity Select
A flexible portfolio with a domestic growth bias utilizing a fundamental research-driven investment process—which includes evaluating material ESG factors—to identify high return businesses trading at attractive prices
- Flexibility to invest across the market capitalization spectrum and outside the benchmark
- Seeks to identify quality businesses and applies a disciplined valuation framework
- Leverages experienced team and an integrated research approach
- Incorporates material Environmental, Social and Governance (ESG) factors into the investment process as an additional source of insight on company quality
Market Risk: The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companies and the market perception of the global economy.
Liquidity Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Emerging Markets Risk: Emerging markets are likely to bear higher risk due to a possible lack of adequate financial, legal, social, political and economic structures, protection and stability as well as uncertain tax positions which may lead to lower liquidity. The value of a portfolio may experience medium to high volatility due to lower liquidity and the availability of reliable information, as well as due to the strategy's investment policies or portfolio management techniques.
Stock Connect Risk: The Shanghai/Shengzen-Hong Kong Stock Connect are relatively new trading programmes, where many of the relevant regulations are untested and subject to change at any moment as well as not as active as exchanges in more developed markets which may affect the ability to trade.
Counterparty Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.
Currency Risk: Investments in a currency other than the base currency of the portfolio are exposed to currency risk. Fluctuations in exchange rates may affect the return on investment. If the currency of the portfolio is different from your local currency, then you should be aware that due to exchange rate fluctuations the performance may increase or decrease if converted into your local currency.
- Sustainable cash flow growth and return on equity at attractive valuations can drive long-term performance
- High quality, underappreciated emerging-market companies are the optimal way to access local market growth
- Integrating material ESG factors into the investment process provides an additional source of insight on company quality
- Companies with principal businesses in Emerging and/or Frontier markets with market capitalization >$1 billion and >$5 million daily liquidity
Quality Track Record
- Profitability screen: ROE > 15%
- Financial strength screen: Net Debt/EBITDA <2.5x
- Attractively valued: Price/cash flow < 3 year cash flow growth
- Competitive positioning, industry analysis and applying ESG lens
- Historically averaged approximately 1,000 company meetings annually, at our offices and on-site, through extensive travel
- Meet with competitors, suppliers and clients
- Assess ESG, regulatory, political and macroeconomic risk
- Proprietary cash flow models
- Analyze sensitivity to cash flow growth assumptions
- Establish price targets for security
- Measure risk at the security and portfolio level
- Minimum upside potential of 50% over 3 years for a security
- Position size based on level of conviction