The fund will invest in companies listed on, or dealt in, emerging markets but can also invest in firms based elsewhere which generate most of their earnings in emerging markets. Although it is Ucits compliant, it is a long-only fund that will not use shorting techniques.
Fund managers Tim Love and Joaquim Nogueira will position the portfolio to benefit from the growth potential that they see in global emerging market economies and the mis-pricing of stocks that that often occur in these markets.
Love – GAM’s investment director for emerging market equity strategies – has 26 years investment experience but is new to GAM, having joined in February. He was previously senior portfolio manager at CQS/Oceanwood, where he ran long/short emerging market equity portfolios. He has previously worked at Cazenove Capital Management and Deutsche Bank, among other investment firms.
Nogueira, an investment manager in GAM’s emerging markets equity team since January, has 15 years’ investment experience. He has worked alongside Love since starting his investment career as a senior analyst in 1996.
Love and Nogueira, believe that global emerging markets have a better risk and return trade-off over the long-term than developed markets. The timing for investing in emerging markets equities is also regarded by the co-managers as ideal because many companies are trading at discounts relative to their historical highs and relative to similar firms in developed markets.
To select stocks, the co-managers screen stocks in relation to valuation and earnings then analyse each company from a bottom-up basis so they fully understand how the company is run and the management team behind it. Portfolios are then built using top-down analysis to identify companies that are mis-priced, with the potential to reap the rewards once the market recognises its true value.
Emerging markets are a popular choice for investors as their long-term growth prospects are well documented at a time when investors are looking for alternatives to debt-laden developed markets. However, markets do not go up in a straight line and even though the potential rewards may be higher than average, emerging market equities tend to have periods of high volatility. This can make emerging market equity funds higher risk even if the long-term case for investing remains sound.