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Global Emerging Markets (ex China) Leaders
The strategy launched in 2024 and seeks to invests in between 25-45 high-quality emerging markets companies with a total stock market value of at least US$1 billion, but excluding China.
The Global Emerging Markets (ex China) Leaders strategy seeks to invest in 25-45 high-quality companies with exceptional cultures, strong franchises, and resilient financials outside of mainland China. It aims to achieve attractive long-term capital growth and contribute to a more sustainable future across global emerging markets.
It was launched in July 2024, reflecting investor appetite for global emerging market specialist funds without allocations to China, as well as pockets of concern over perceived investment risk and volatility in China.
Leaders simply means that the strategy is focused on companies with a market cap value of at least USD1 billion at the time of investment.
Strategy highlights: a focus on quality and sustainability
- Companies must contribute to sustainable development.
- We invest in high-quality companies with exceptional cultures, strong franchises and resilient financials. How we pick companies >
- We avoid companies linked to harmful activities and engage and vote for positive change. Our position on harmful products >
- Our approach is long-term, bottom-up, high conviction and benchmark agnostic
- We focus on capital preservation as well as capital growth – we define risk as the permanent loss of client capital
Latest insights
Quarterly updates
Strategy update: Q3 2024
Global Emerging Markets (ex China) Leaders strategy update: 1 July - 30 September 2024
This strategy launched during the quarter. We have found that asset allocators tend to have a bifurcated view on China, sometimes choosing to allocate large amounts of capital to China separately and sometimes choosing to avoid the region entirely. By launching this strategy, we are not making any sweeping statement about what we expect to happen in China in the years ahead. We are simply cognisant of the approach that some clients take and with our history of having limited amounts of capital allocated to China in our GEM All-Cap and Leaders strategies, we think we are well positioned to also manage this strategy.
Most of the quarter’s activity happened in September, as is often the case. It is in such moments, like the biggest market moves since 2009 in China and Hong Kong and rising geopolitical tensions in the Middle East, that we remain grateful for our long-term philosophy. It gives us the ability to step back in moments of such volatility and reminds us to focus on the more important, bottom-up drivers for the companies we own on your behalf.
We have not made any new purchases since launch on 11 July but we have sold out of one position, Kotak Mahindra Bank (India: Financials). We have seen Kotak, and other banks, finding it harder to attract deposits that will allow it and the others to keep growing loans at a fair clip that warrants the valuations the bank is currently on. It used to be the case that public sector banks were so discredited that no depositor would want to risk their savings at one of these state-owned banks. But this sector has been really cleaned up, which is great for the Indian consumer but makes for a more difficult competitive environment for the private sector banks, including Kotak. With growth looking muted and residual concerns about management, we decided to sell our holding.
An area where we are doing a lot of thinking is Poland. Here we hold Allegro (Poland: Consumer Discretionary), Dino Polska (Poland: Consumer Staples) and Jerónimo Martins (Portugal: Consumer Staples), which is listed in Portugal but >50% of revenues are from its Biedronka business in Poland.1 They all experienced strong growth through 2022 and 2023 as inflation helped them increase profit margin but the opposite has now happened. Deflation in food prices and rising costs have squeezed profit margins considerably.
As always, we spend the bulk of our time on continuing to better understand the quality attributes of the companies we invest in and finding similarly resilient ideas to add to the portfolio.
1 Source: Jerónimo Martins Annual Report 2023
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
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Proxy voting
Proxy voting: Q3 2024
Global Emerging Markets (ex China) Leaders proxy voting: 1 July - 30 September 2024
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 47 resolutions from five companies to vote on. On behalf of clients, we did not vote against any resolutions.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Sustainable investment labels help investors find products that have a specific sustainability goal. This product does not have a UK sustainable investment label as it does not have a non-financial sustainability objective. Its objective is to achieve capital growth over the long-term by following its investment policy and strategy.
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For illustrative purposes only. Reference to the names of example company names mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies. Companies mentioned herein may or may not form part of the holdings of Stewart Investors. Holdings are subject to change.
Certain statements, estimates, and projections in this document may be forward-looking statements. These forward-looking statements are based upon Stewart Investors’ current assumptions and beliefs, in light of currently available information, but involve known and unknown risks and uncertainties. Actual actions or results may differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements. There is no certainty that current conditions will last, and Stewart Investors undertakes no obligation to correct, revise or update information herein, whether as a result of new information, future events or otherwise.
Source: Stewart Investors investment team and company data. Securities mentioned are all investee companies* from representative Asia Pacific All Cap Strategy, Asia Pacific & Japan All Cap Strategy, Asia Pacific Leaders Strategy, European All Cap Strategy, European (ex UK) All Cap Strategy, Global Emerging Markets (ex China) Leaders Strategy, Global Emerging Markets Leaders Strategy, Global Emerging Markets All Cap Strategy, Indian Subcontinent All Cap Strategy, Worldwide All Cap Strategy and Worldwide Leaders Strategy accounts as at 30 September 2024. *Assets that the strategies may hold which an active decision has not been made, and sustainability assessment does not apply, include cash, cash equivalents, short-term holdings for the purpose of efficient portfolio management and holdings received as a result of mandatory corporate actions. Holdings of such assets will not appear on Portfolio Explorer.
The Stewart Investors supports the Sustainable Development Goals (SDGs). The full list of SDGs can be found on the United Nations website.
Source for Climate Solutions and impact figures: © 2014–2024 Project Drawdown (drawdown.org). Source for Human Development Pillars: Stewart Investors investment team.
Source for climate solutions and human development analysis and mapping: Stewart Investors investment team. Contributions are defined by the team as demonstrable contributions to any solution, either direct (directly attributable to products, services or practices provided by that company), or enabling (supported or made possible by products or technologies provided by that company).
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