Emerging markets equity

The diversity and depth of emerging markets equities offer ample opportunity to deliver excess returns, especially when we incorporate where a company is in its life cycle

Industrial life cycle philosophy

The way in which companies can create wealth for their shareholders varies depending on where companies are in their maturity cycle.

We aim to identify these opportunities through our proprietary industrial life cycle (ILC) methodology, which focuses on finding companies’ true economic worth and their path to creating value for shareholders over time.

The emerging market universe is complex. By focusing on cash flow and economic returns, we can eliminate accounting distortions, which allows for more accuracy in our evaluation of management skills and execution within the context of a company’s maturity.

The chosen stock ideas are managed within a core-oriented portfolio that has a high active share, derived almost exclusively from stock-specific sources. We also have access to the extended investment team at River and Mercantile, including the macro team, which gives us the opportunity to consider investment through a macroeconomic lens, where appropriate. We believe this philosophy allows us to achieve a steady source of excess returns that are inherently repeatable on behalf of investors.

Process

Through our ILC investment process, we aim to extract repeatable excess returns from emerging markets, across the spectrum of style, country, sector and size. Investing across broad capitalisation tiers gives us the ability to invest into diverse themes and regions for different ideas.

Classify

Companies are classified into one of the distinct stages of corporate maturity – from growth through very mature – to create a unique peer set from which companies are analysed.

Identify

Companies that are pursuing appropriate value-creation strategies for their life cycle are identified.

Select

We select a portfolio of companies across the spectrum of corporate maturity that are pursuing a value-creation strategy. This will be where the potential of these companies has yet to be acknowledged by current stock price expectations.

During stock selection, we carry out in-depth analysis of individual company risks, including where we see cause for concern in terms of ESG (environmental, social and governance) issues.