Global Emerging Markets Sustainability

Global Emerging Markets Sustainability

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This information is a financial promotion for the Stewart Investors Global Emerging Markets Sustainability Strategy intended for retail and professional clients in the UK.

Investing involves certain risks including:

  • The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.
  • Currency risk: the Fund invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the Fund and could create losses. Currency control decisions made by governments could affect the value of the Fund's investments and could cause the Fund to defer or suspend redemptions of its shares.
  • Emerging market risk: Emerging markets tend to be more sensitive to economic and political conditions than developed markets. Other factors include greater liquidity risk, restrictions on investment or transfer of assets, failed/delayed settlement and difficulties valuing securities.

Where featured, specific securities or companies are intended as an illustration of investment strategy only, and should not be construed as investment advice or a recommendation to buy or sell any security.

For a full description of the terms of investment and the risks please see the Prospectus and Key Investor Information Document.

If you are in any doubt as to the suitability of our funds for your investment needs, please seek investment advice.

The strategy was launched in 2009. It invests in the shares of between 30-75 companies in emerging markets. 

You can see all of the companies that this strategy invests in by filtering on our Portfolio Explorer tool.

  • We define investment risk as losing clients’ money – this means we focus on looking after your money as well as growing it

  • Companies must contribute to sustainable development and make a positive impact towards a more sustainable future.  Portfolio Explorer >

  • 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 >

Quarterly updates

Strategy update: Q3 2024

Global Emerging Markets Sustainability strategy update: 1 July - 30 September 2024

Most of the quarter’s activity happened in September, as is often the case. It is in such moments, like the biggest stock 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 unpredictable change and reminds us to focus on what we believe are more important, company-focused drivers of change.

Over the course of the quarter, we have sold out of one of our Indian banks. RBL Bank (India: Financials), which we purchased in December 2023. We liked the new management team who seemed determined to move the bank towards less risky (more secured) lending. We also thought the company was attractively valued. Unfortunately, the quarter after we purchased the company, it became clear that unsecured bank loans had been growing at over 30%, and the path to a more balanced loan portfolio would be a lot longer than we had expected. Added to that, we are seeing a few banks that are struggling to grow their deposit base which impacts how they can fund their loan growth. For many years, most people and businesses who deposit their money in banks avoided the public sector banks as they feared they may lose their money. The public sector banks have now improved and professionalised which is great for the Indian saver and borrower but tougher for the private sector banks like RBL who now face tougher competition from the public sector banks. With prospects for RBL looking riskier and with better ideas elsewhere, we exited the position.

We sold Yifeng Pharmacy Chain (China: Consumer Staples) as we were worried about increased regulatory oversight, such as price cuts on drugs purchased through medical insurance plans, having a negative impact on profit margins.

We also fully sold Clicks (South Africa: Consumer Staples), another pharmacy chain. Growth has been phenomenal at this business with new store openings continuing at pace and a mix of available goods and services helping to drive profits. The valuation is expensive and we decided to exit the position to fund better-priced opportunities. We think Clicks remains a very high-quality business.

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Finally, we sold Integrated Diagnostics (Egypt: Health Care) to fund better ideas elsewhere.

We did not buy any new companies during the quarter.

We continue to discuss our China company holdings at length, especially considering the recent stock market moves. But another 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 sales are from its Biedronka business in Poland.1 They all experienced strong growth through 2022 and 2023 as food price inflation helped them increase profits but the opposite has now happened. Deflation in food prices and rising costs have reduced profit margins.

As always, we spend most of our time continuing to understand as much as we can about the quality of the management, business franchise and financials of the companies we invest in and also continue to look for new 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.

Strategy update: Q2 2024

Global Emerging Markets Sustainability strategy update: 1 April - 30 June 2024

We have seen a continuation of geopolitical surprises throughout the quarter which have caused short-term volatility (rapid and unpredictable price fluctuations).

Claudia Sheinbaum was elected the first female President of Mexico with a large victory that her party now holds a two-thirds majority in both congressional houses and means it could make constitutional changes. India completed the largest democratic election in the world with a surprise vote removing Narendra Modi and the Bharatiya Janata Party’s absolute majority in the Lok Sabha (also known as the House of the People and the lower house in the Indian Parliament). The Nifty 50 (top 50 stocks by market capitalisation listed on the National Stock Exchange of India) rose the day before the election on the expectation that Modi would get over 400 seats. It then fell 7% when the news broke that he had lost his absolute majority before rising again in the days afterwards as the market decided Modi staying in power with a reduced majority was a positive for Indian democracy1. It is at times like this that we are thankful for our philosophy and process which focuses on the quality of individual companies over a long period of time.

We sold out of seven companies and only bought one new company in second quarter. We sold Amoy Diagnostics (China: Health Care) after a period of better performance. Whilst we still like the way the business is managed, the high operating profit margins generated in the healthcare sector means we have become worried about the regulatory environment stepping in to reduce those margins. We sold Kingmed Diagnostics (China: Health Care) for the same reason and both Amoy and Kingmed are good examples of where top-down country or sector views can break an investment case.

We also sold Tech Mahindra (India: Information Technology) and Dabur (India: Consumer Staples) having bought into both in 2009. Tech Mahindra (known then as Satyam) and Dabur have delivered good performance since first bought. Whilst we still believe that they are good companies, valuations are becoming problematic. Tech Mahindra has been a great investment over the last ten years but we believe we have a better option for the next ten years in Tata Consultancy Services (India: Information Technology). Tech Mahindra has seen profit margins reduce and it is also expensive. Dabur is a soaps and detergents producer in India which has delivered successful financial results but we expect growth to be lower in the future. Valuations in India remain one of our biggest concerns and we have been trimming back our positions there including Marico (India: Consumer Staples) and Mahindra & Mahindra (India: Consumer Discretionary) due to valuations. We also sold Pigeon (Japan: Consumer Staples) as we lost confidence in the speed and extent of the evolution of the business which is facing rising challenges (headwinds) such as declining birth rates.

Finally we sold out of Banco Bradesco (Brazil: Financials) and Infineon Technologies (Germany: Information Technology). Infineon is a semiconductor designer and manufacturer mainly serving the automotive sector and it is moving into software solutions, but we feel there are better ideas elsewhere. Banco Bradesco was a mistake which we are rectifying by exiting the position. We underestimated the impact of Nubank (a financial technology bank, known as a neobank) on the country’s banking sector and Banco Bradesco is behind in providing more advanced digital banking services. To compete, the company would have to change substantially at a time when Brazil’s economy is looking uncertain.

The only new company we have purchased is MediaTek (Taiwan: Information Technology), a leading fabless (outsources production) design house in Asia. It has a continued focus on quality and even more focus on the affordability of technology, helping to provide innovative solutions to many global development challenges. Barriers to enter the market for competitors are getting higher with faster product cycles and longer design times. The company has access to great designers in Taiwan. The company has steady financials and good management and we aim to hold this company for the long term.

We have been selectively adding to some positions in technology companies at lower prices to continue building a long-term position. We added to Samsung Electronics (South Korea: Information Technology) as we believe it is in the early stages of a memory cycle recovery. We also added to Globant (Argentina: Information Technology) which suffered as IT capital expenditure (capex) was postponed by several customers, but growth has held up better than we expected and we don’t see it as too expensive.

1 Source: Bloomberg

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.

Strategy update: Q1 2024

Global Emerging Markets Sustainability strategy update: 1 January - 31 March 2024

Over the course of this quarter, we sold our positions in three holdings and initiated in one new company. 

The first of the three was Vinda International (China: Consumer Staples), a Hong Kong listed tissues maker that was steadily offering higher-quality hygiene products with higher pricing power. The company was run by the combination of the Li family as owner-managers and Essity, the Swedish multinational. We sold our holding in the company after a bid to acquire the company was accepted by the majority shareholders.

We also sold Komerční banka (Czech Republic: Financials) and Infosys (India: Information Technology). Both companies remain high-quality, well-run franchises but were getting closer to fairly valued rather than cheap. As such, we decided to use the proceeds to invest in ideas where we saw the potential for better returns.

One such example is Allegro (Poland: Consumer Staples), a dominant e-commerce platform in Poland with c.40% market share, nine times larger than their nearest competitor. Allegro has been able to steadily defend this market share against new companies, even through a period of mismanagement. With a new CEO in place, Allegro is focused on improving their international operations and re-focusing on profitable growth.

We also took the opportunity as valuations have come off across a number of our high-quality Chinese holdings to continue to invest more in these companies. A few of these include Glodon (China, Information Technology), Milkyway Intelligent Supply Chain Service (China: Industrials), and Yifeng Pharmacy Chain (China: Consumer Staples) – all well placed to be the leaders in their respective industries, aligned with the broader sustainable development of the economy, and remain on reasonable valuations for steady earnings growth.

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.

Strategy update: Q4 2023

Global Emerging Markets Sustainability strategy update: 1 October - 31 December 2023

Over the course of this quarter, we initiated four new positions in the portfolio. Two of these new positions are in China: Centre Testing International (China: Industrials) and Midea (China: Consumer Discretionary). 

Centre Testing International provides inspection and certification services for industrial and consumer products across China, ensuring product quality and safety standards. The franchise benefits from being one of the first movers in the country, and continues to take share in a fragmented market as scrutiny rises on health, environmental and product standards. The balance between long-term family stewards and a professional manager who spent decades at one of the world’s leading inspection and certification services firms helped us build conviction in the quality of people here as well.

We also initiated a position in Midea, China’s dominant domestic home appliances manufacturer. Midea is taking the cash flows from this business, and reinvesting behind expanding into attractive growth areas like digital building automation, integrated energy management and industrial robots.

The third new position was a re-initiation in Samsung Electronics (South Korea: Information Technology). We have long admired the strength of the Samsung Electronics franchise, along with the ability they have shown to evolve. We believe current valuations do not reflect a recovery in the memory market, or the investments that Samsung Electronics continues to make behind long-term growth. The business continues to have an impressive ability to generate cash, and a solid balance sheet.

Finally we initiated a new position RBL Bank (India: Financials), a private bank in the midst of a turnaround. The bank lost its way through aggressive growth leading to high non-performing loans (NPLs). As a measure of abundant caution India’s central bank stepped in to change management and solidify the foundations of the bank. We believe new management is putting in place the right systems to build a quality credit culture with a focus on lower risk assets funded mostly by deposits. A successful turnaround could yield attractive returns for shareholders.

We have also continued adding to some of our high-quality holdings where valuations have become more attractive. One such example is WEG (Brazil: Industrials), a manufacturer of electric motors, which are sold into areas like electric vehicles (EVs) and renewable energy with structural growth opportunities. WEG has been consistently investing behind expanding outside of Brazil and is focused on Mexico, China, and India as their next large regions of growth. Alongside, they have recently completed their largest acquisition with the balance sheet remaining in sound health.

To fund these additions we trimmed a few positions where valuations had become less attractive including MercadoLibre (United States: Consumer Discretionary), Hoya (Japan: Health Care), and Infosys (India: Information Technology). In each of these cases, we continue to have conviction in the quality of people and the franchises, but believe increasingly stretched valuations suggest we might have better opportunities elsewhere.

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.

Proxy voting

Proxy voting: Q3 2024

Global Emerging Markets Sustainability proxy voting: 1 July - 30 September 2024

Proxy voting by country of origin

Proxy voting by proposal category

During the quarter there were 153 resolutions from 17 companies to vote on. On behalf of clients, we voted against three resolutions.

We voted against the appointment of the auditor at Philippine Seven as they have been in place for over ten years. The company has given no information on intended rotation which we believe is important for ensuring a fresh perspective on the accounts. We also voted against proposals on transaction of business, as the company did not provide enough information about the proposals. We wanted to avoid giving them unrestricted decision-making power without sufficient clarity. (two resolutions)

We voted against the appointment of the auditor at Vitasoy as they have been in place for over ten years. The company has given no information on intended rotation which we believe is important for ensuring a fresh perspective on the accounts. (one resolution)

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.

Proxy voting: Q2 2024

Global Emerging Markets Sustainability proxy voting: 1 April - 30 June 2024

Proxy voting by country of origin

Proxy voting by proposal category

During the quarter there were 412 resolutions from 38 companies to vote on. On behalf of clients, we voted against 14 resolutions.

We abstained from voting on amendments to work systems for independent directors and board meeting procedures at Amoy Diagnostics as the company did not provide enough data on the proposed amendments. (two resolutions)

We voted against the appointment of the auditor at EPAM Systems, Glodon, Yifeng Pharmacy Chain and Zhejiang Supor as they have been in place for over 10 years and the companies’ have given no information on intended rotation. We believe rotating an auditor on a relatively frequent basis (e.g. every 5-10 years) helps to ensure a fresh pair of eyes are examining the accounts, and follows best practice. (four resolutions)

We voted against the proposed employee stock ownership plan at Midea as we believe that involving non-executive directors in the plan could create conflicts of interest and would not be in the best interest of the shareholders. (three resolutions)

We abstained from voting on amendments to articles (rules and regulations that govern the company's operations) at Quálitas as the company did not provide sufficient information on the amendments. (one resolution)

We voted against the recasting of votes (where previously cast votes on a particular matter are reconsidered or revised) for the supervisory council at RaiaDrogasil as we believe the principle of recasting votes for an amended slate (a revised list of candidates or nominees for a particular position or role at a company) is poor practice and would prefer the slate to be resubmitted for voting. (one resolution)

We abstained from voting on a series of proposals on capital and shares allocation and board elections and reports at Regional as the company did not provide enough information. (12 resolutions)

We voted against the establishment of a supervisory council and cumulative voting at TOTVS as no detail on the candidates was provided. (two resolutions)

We voted against recasting (where previously cast votes on a particular matter are reconsidered or revised) and cumulative voting at WEG as this would allow the board to make changes without shareholder assessment or knowledge of the candidates. (three resolutions)

We abstained from voting on requests for a separate board election and the election of a supervisory council position at WEG as there was not enough information and we would prefer the current family stewards remain in place. (two resolutions)

We voted against a shareholder proposal about board declassification at EPAM Systems as we do not believe it is necessary for all directors to stand for election annually and have concerns that this could destabilise the board by allowing excessive turnover. (one resolution)

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.

Proxy voting: Q1 2024

Global Emerging Markets Sustainability proxy voting: 1 January - 31 March 2024

Proxy voting by country of origin

Proxy voting by proposal category

During the quarter there were 190 resolutions from 20 companies to vote on. On behalf of clients, we voted against 8 resolutions.

We voted against a Board appointment at Banco Bradesco as we would encourage the appointment of more external independent Directors as well as four other resolutions. (five resolutions)

We voted against excessive executive pay at Bank Central Asia. (one resolution)

We voted against one resolution at Midea in relation to them acting as guarantor for a subsidiary business as we found the guarantee amount to be excessive and not in shareholders’ best interests. (one resolution)

We voted against a Board appointment at Samsung Electronics as we would prefer to see more independent, non-family associated Directors. (one resolution)

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.

Proxy voting: Q4 2023

Global Emerging Markets Sustainability proxy voting: 1 October - 31 December 2023

Proxy voting by country of origin

Proxy voting by proposal category

During the quarter there were 48 resolutions from 11 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.

Portfolio Explorer

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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 Sustainability Strategy, Asia Pacific & Japan Sustainability Strategy, Asia Pacific Leaders Sustainability Strategy, European Sustainability Strategy, European (ex UK) Sustainability Strategy, Global Emerging Markets (ex China) Leaders Sustainability Strategy, Global Emerging Markets Leaders Sustainability Strategy, Global Emerging Markets Sustainability Strategy, Indian Subcontinent Sustainability Strategy, Worldwide Sustainability Strategy and Worldwide Leaders Sustainability 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).

Investment terms

View our list of investment terms to help you understand the terminology within this document.

Fund prices and details

Click on the links below to access key facts, literature, performance and portfolio information for the funds and share classes available in this jurisdiction:

Stewart Investors Global Emerging Markets Sustainability Fund

Overview of Stewart Investors Global Emerging Markets Sustainability Fund performance

Fund name Fund type Currency Price Daily change Price date Factsheet
Stewart Investors Global Emerging Markets Sustainability Class III (Acc) Irish UCITs JPY 1378.15 -0.48 11 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class I (Acc) Irish UCITs EUR 9.90 -0.49 11 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class I (Acc) Irish UCITs USD 11.18 -1.47 11 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class VI (Acc) Irish UCITs EUR 2.56 -0.48 11 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class VI (Dist) Irish UCITs EUR 12.17 -0.48 11 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class VI (Acc) Irish UCITs GBP 9.85 -0.87 11 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class VI (Acc) Irish UCITs USD 12.41 -1.46 11 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class A (Acc) OEIC GBP 385.21 -0.66 12 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class B (Acc) OEIC GBP 430.51 -0.65 12 Nov 2024
Stewart Investors Global Emerging Markets Sustainability Class A (Acc) OEIC EUR 448.50 -0.75 12 Nov 2024

Share prices are calculated on a forward pricing basis which means that the price at which you buy or sell will be calculated at the next valuation point after the transaction is placed. Where a fund price is marked XD, this means that the fund is currently Ex-Dividend. Past performance is not necessarily a guide to future performance. The value of shares and income from them may go down as well as up and is not guaranteed. Please note that the yield quoted above is not the historic yield. It is considered that the yield quoted represents the current position of investments, income and expenses in the fund and that this is a more accurate figure. Investors may be subject to tax on their distribution. The yield is not guaranteed or representative of future yields. You should be aware that any currency movements could affect the value of your investment. The Funds within the First Sentier Investors Global Umbrella Fund plc (Irish VCC) are denominated in USD or EUR.