Emerging Market equities’ forward earnings multiples are still trading at a significant discount to those of developed markets (DMs) and their fundamentals have continued to improve in relative terms.
Though the political risk differential between Emerging Markets and Developed Markets has been narrowing as DM political risk has increased, it should remain stable in 2018.
What to know
- Emerging Market value stocks are still trading near record-low valuations (1999–2000, 2008) and the potential payoff can be significant.
- We believe that Emerging Markets will continue to offer better growth potential due to their demographic advantage and the convergence of their economies with Developed Markets.
- On forward earnings multiples, Emerging Market equities are still at a discount to Developed Market equities.
- Value companies have generally underperformed over the last few years. The rebound seen last December was very short-lived and momentum is still the main driving factor, as quality has not yet picked up despite significantly higher volatility.
- We focus on companies trading at low or reasonable valuations adjusted for their quality, region and sector.
Investment philosophy & process
Our Global Emerging Equity strategy is built on an active discretionary country allocation, a conscious approach to factor exposure focused on value and quality, and a thorough bottom-up risk assessment of all portfolio holdings.
It aims to generate improved returns relative to the MSCI Emerging Markets index over the long term by offering better country diversification and a stock selection process that combines the benefits of quantitative and fundamental research techniques.