In the latest podcast, Paul Sloane, Portfolio Manager, summarises portfolio activity over the quarter including:
- The growth trends behind our conviction
- Reliance Industries – introducing our new stock
- ESG – looking beyond COVID-19
Our performance should continue to hinge on a diverse set of GEMs companies with world-leading IP and strong ESG characteristics
Hi Welcome to the quarterly update from the Martin Currie Emerging Markets team. My name is Paul Sloane and I am one of the Portfolio Managers on the team.
Q3 was another strong quarter for emerging markets in absolute terms and its pleasing that our strategy outperformed strongly*. Our track record has been built on long-term stock driven investing with market leading ESG integration, And this quarter the number of companies that contributed to our performance, spanning numerous sectors and countries gives us confidence in the breadth of high conviction companies we are invested in.
It was a quarter where GEMs markets where less dominated by COVID-19 impacts although these still remain very influential. It was also a quarter where investors could look at top-down and bottom-up data and try to interpret that data in terms of how quickly or fully activity was bouncing back post shutdowns. But for many companies in our portfolio the Q3 outcome was better than just a bounce back.
Ultimately growth (as opposed to value) has dominated the GEMs equity market recovery this year. Many GEMs companies with world-leading IP are enjoying an acceleration in already high growth.
We have long-held conviction in areas like in-home media consumption, e-commerce, electric vehicle adoption and food delivery so it is pleasing to see the companies we own in these areas report that growth is as we speak coming through strongly. Our conversations with companies have been focused on much more than just the immediate impact of COVID (and indeed the ESG implications of this). More important to us is the long-term impact on demand and company strategy. As always, these engagements have a clear long-term lens and a strong ESG focus.
We weren’t very active in the portfolio which is normal. We made a small number of position size adjustments, part of which was to inflect index weight changes in companies already held. So, in this regard we are ensuring we express conviction in companies we like as conviction is a precious commodity in investing. We made no sales in the quarter and we bought just one new company which was Reliance Industries in India*. Now Reliance is an unusual company as in some regards it is an old school multi-industry company but key for us is that it is now focusing on 3 businesses going forward– a leading telecom/digital franchise, a leading omnichannel retail franchise and a profit leading refining/chemicals business. We like this strategy which makes sense to us, and this is a view backed by the very significant investment from a range of global partners the company is currently seeing in 2 of 3 of these focus areas.
I mentioned the strong performance of growth since the market lows in March and GEMs is not immune as an asset class to a revived growth vs. value debate. There are many views as to what might trigger a rotation into value sectors that have lagged yet again over the last six months.
Now the Martin Currie Emerging Markets team work hard to deliver a consistent level of performance to our clients. We build a portfolio which does have a tilt towards quality and growth but has a similar valuation to the GEMs market*. This does not make us disinterested in any potential growth vs. value rotation. But it does mean we that our starting point is that we have valuation discipline. And having enough value in the portfolio should mean that performance outcomes don’t hinge in binary fashion on whether or not that market rotation takes place. Instead our performance should continue to hinge on a diverse set of GEMs companies with world-leading IP and strong ESG characteristics.
Thanks for listening.
* Source: Martin Currie, as at 30 September 2020
12-month standardised performance
|To end Q3 2020||To end Q3 2019||To end Q3 2018||To end Q3 2017||To end Q3 2016|
|MSCI Emerging Markets||10.9%||(1.6%)||(0.4%)||22.9%||17.2%|
Past performance is not a guide to future returns. The return may increase or decrease as a result of currency fluctuations.
Source: Martin Currie, three month period to 30 September 2020. All data presented is the Martin Currie Global Emerging Markets US$ composite. Gross data is presented without deducting investment advisory fees, broker commissions, or other expenses that reduce the return to investors. The figures provided includes the re-investment of dividends. MSCI Emerging Markets Index used as benchmark. The performance record noted above is clear representation of the Global Emerging Market strategy performance over the period shown. Performance information since inception in complete 12 month periods is available upon request.