Alquity Investment Management Ltd.

The 5 Traits to look for in an Emerging Market


Why the Alquity Future World fund represents the ideal combination of skills and expertise needed to invest in Emerging Markets
The grouping of countries under the heading of Emerging Markets (EM) is the investment equivalent of describing wines as fermented grape juices. Whilst the description is accurate at a basic level, it clearly ignores the huge range and uniqueness that wines from different regions possess. To really understand EM, like wine you have to treat each region and country on its own merits, identifying strengths and risks without making sweeping generalisations. So, what are the key attributes EM investors must possess
to be successful in this eclectic and dynamic asset class
? We have highlighted a few of them below using our Future World Fund as an example:

It is often stated that EM investors should be based “on the ground” to fully understand the context and issues facing the economies, which in turn allows for more informed decisions. As stated earlier, EM are such a varied mix of economies and cultures, where would “on the ground” actually be? Large asset managers may at this stage point to having teams in every market. This sounds impressive until your job as a Portfolio Manager is to piece together all this information into a cogent investment strategy.
The risk is that you literally become a “manager” trying to maintain consensus, rather than a focused investor. Instead, the question should be, how do you make the best, fact-based investment decisions consistent with your fund strategy?
At Alquity, that is done by having a single multidisciplinary team working together and pretty much co-located (although due to Covid, one of the team is US based for the moment). Travelling into different countries for company site visits and wider research allows the team to assess each country on what they see and hear rather than through a “home” country bias. In addition, the team shares a consistent investment process that incorporates quantitative analysis alongside fundamental research to ensure investment conviction is holistic on each country and holding.