Transcript
The defining characteristic of our approach is a steady disciplined investment process that operates in the first instance of the top-down country level. We think that’s where the underappreciated opportunity is in EM. We think that by focusing on what’s happening top-down at the country level, that’s our edge, compared to the great bulk of money in the asset class, which is run bottom-up.
There’s a substantial body of academic financial literature that shows a strong country effect in EM equity, and that emerging markets are different from developed markets because of that. It’s been our overwhelming experience over the nearly 30 years that I’ve been doing the asset class that the country effect is very important.
When we speak to clients, they instinctively understand that when one is investing in China, or India, or Brazil, a lot of the risks will come from what’s happening in China, what’s in happening India, what’s happening in Brazil. Despite that, the very great bulk of money that’s invested in EM equity is run on a pure bottom-up basis. Focused on finding the best companies.
There’s some great stock-picking managers out there. There are many routes to the summit of the mountain. But we think that dominant approach ignores the opportunity that comes at the country level by focusing on what’s happening with politics, what’s happening with the economic data, and changing forecasts. And what’s happening at a market level, in terms of the equity market, but also, bond markets and currency markets.
We think there’s a lot of information there that can drive future outperformance. And our process is focused on that in the first instance. And so, I think our workflow and the information we look at is very different from a lot of our peers. Our portfolio, in terms of both its construction and, also, its performance, is very different.
I think that the portfolio is a very strong standalone approach to the asset class. We also have a lot of clients who own multiple emerging market portfolios, and they find us a good blend with their preferred bottom-up manager because of the differentiated nature of how we invest in emerging markets.
