A Time to Perform
Emerging Market growth equities have been under the hose these last 18 months. However, Rob Brewis provides reasons for being more optimistic in October’s 60 Second GEM insights.
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I don’t think there are many out there who will quibble with the long-term performance of our Aubrey GEM Opportunities Strategy which now extends over a decade. There are very few, if any, investors in emerging markets who have returned 136% since 2012, when the benchmark has only managed 22%.
But this is of little comfort to clients who have invested with us in the past couple of years during which we have lagged the index and often some of our competitors too. With the beauty of hindsight, after a 52% gain in 2020, 34% ahead of the benchmark, a number of our quality growth consumer stocks were arguably overvalued. Thankfully, this is no longer a concern, with our portfolio comfortably back in its historic 20-30x PE range.
It is worth highlighting that after the 34% outperformance in 2020, not to mention the 10% outperformance in 2019, we gave back only 2.0% in 2021 and 5.7% in 2022. This year started with a further relative decline, as China delivered what can best be described as a huge “dummy”, worthy of the best winger at the current rugby world cup, and Taiwanese technology had its “AI” moment in the sun. But we are now clawing this back steadily.
We have always prided ourselves in an ability to avoid the worst of the downside in emerging markets, thanks to our focus on both the consumer sectors and the inherent quality of our companies. In fact, over the long term, much of our relative gains come from avoiding downside, but this quality has evaded us in recent years, mostly due to the challenges of the Chinese consumer.
What we are most encouraged by in recent months is the return of this quality. The past three months or so have not been happy for emerging markets but we have distinctly outperformed both the market and, perhaps more pertinently, our key competitors. We believe this signals a return to “normal service”.
We also believe that the prospects for a number of our markets (India, Mexico, Brazil, Indonesia to name a few), look compelling and we have not felt more positive about the portfolio for some time. This suggests positive absolute, as well as relative, performance ahead.
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This video has been issued by Aubrey Capital Management Limited which is authorised and regulated in the UK by the Financial Conduct Authority and is registered as an Investment Adviser with the US Securities & Exchange Commission. You should be aware that the regulatory regime applicable in the UK may well be different in your home jurisdiction.
This video has been prepared for information purposes and is not a solicitation, or an offer to buy or sell any security. The information on which the video is based has been obtained from sources that we believe to be reliable, and in good faith, but we have not independently verified such information and no representation or warranty, express or implied, is made as to their accuracy. All expressions of opinion are subject to change without notice. Any comments expressed in this video should not be taken as a recommendation or advice.
Please note that the prices of shares and the income from them can fall as well as rise and you may not get back the amount originally invested. This can be as a result of market movements and of variations in the exchange rates between currencies. Past performance is not a guide to future returns and may not be repeated. Aubrey Capital Management Limited accepts no liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this video or any part of its contents.
This video does not in any way constitute investment advice or an offer or invitation to deal in securities. Recipients should always seek the advice of a qualified investment professional before making any investment decisions.
