The fund benefits from having managers in place who specialise in Asia and Global Emerging Markets investing, with Jack Nelson holding the lead manager role since 2017. They have deep local expertise and contacts with Nelson based in Sydney and Sujaya Desai working out of Singapore.
The team have a very clear and stable investment philosophy of finding quality companies which have predictable and sustainable growth profiles. They see this mix as being the best defence against the risk of investing in emerging markets.
The fund has demonstrated attractive downside protection for clients, with its focus on consumer staples, more defensive parts of the market and a willingness to hold cash. However, it has historically tended to underperform in rising markets.
This is a core option for investors looking to invest in an ethical/ sustainable GEM mandate.
The investment process has four key stages beginning with Company Classification. The team look for companies delivering sustainable goods and services, responsible finance or required infrastructure.
This is followed by a Quality Assessment analysing management integrity, performance, and attitude to Environmental, Social and Governance issues as well as a company’s environmental and social efficiency. It also looks at a company’s responsible business practices.
Financials are also scrutinised such as a company’s long-term cash flow, innovation, and whether it has dominant economies of scale or high switching cost services.
The managers avoid exposure to the majority of the “sin” sectors because they are poorly positioned for long-term sustainable development.
Ideas are generated through extensive company visits, research trips, and industry contacts. The team meets a company at least once before investing. This process produces a quality list of around 300 names which are then whittled down to between 40 and 60 in the portfolio.
The third stage is valuation looking to categorise each stock as either cheap, fair value or expensive, with the fourth stage encompassing investing, ongoing active engagement, and risk monitoring to improve returns.
The portfolio has a bias towards Information Technology and Consumer Staples, with its main geographical exposure being to Emerging Asia followed by Latin America.