Investment StrategiesGlobal and International Equities
JOHCM Emerging Markets Equities
|FUND NAME||Benchmark||Base Currency||1 year %||3 years % pa||5 years % pa|
|JOHCM Emerging Markets Fund||A||GBP||44.34||10.91||9.95|
|JOHCM Global Emerging Market Opps Fund||A||GBP||39.82||12.47||9.50|
|AIT Emerging Markets Small Cap Inst||B||USD||26.06||N/A||N/A|
|A: MSCI Emerging Markets NR Index 12 noon Adjusted||GBP||37.31||6.93||6.91|
|B: MSCI Emerging Markets SMC||USD||12.65||N/A||N/A|
Our two emerging market equity teams have contrasting investment approaches but both outperformed the MSCI Emerging Markets Index over the period. Our London-based JOHCM Global Emerging Market Opportunities team follows a top-down approach, with country selection as the starting point for portfolio construction. Nevertheless, it was stock selection rather than country allocation calls that accounted for the strategy’s outperformance over the year. Of note was good stock picking within India, South Africa and South Korea, with Samsung Electronics and South African-listed internet media group Naspers among the portfolio’s top individual performers. Unusually, country allocation was a modest headwind over the year, with a sizeable underweight in Brazil being a negative influence upon the portfolio’s performance. Subsiding expectations over US interest rate rises, combined with a recovery in natural resources prices and optimism over domestic political change, led to a strong rally in Brazilian equities despite the country’s poor economic conditions. More brightly, the team’s decision to avoid any exposure to the Mexican stock market aided relative returns.
The Prague-based Global Emerging Markets strategy typically generates outperformance from stock views rather than country or sector selection. The strategy finished well ahead of its benchmark for the 2016 Financial Year, principally due to successful stock selection in the materials, consumer discretionary and telecommunications sectors. The team continues to focus on idiosyncratic growth stocks with earnings momentum, for example finding opportunities in component suppliers within the fast-growing advanced driver assistance systems (ADAS) sector, technology which improves car safety and which is integral to driverless car technology.
In late 2014, we launched a small cap extension strategy for the Prague team. The GEM Small Cap strategy outperformed by over 1000 basis points in the year to September 2016 and has built a compelling performance record since inception. It particularly benefited from excellent stock picking in the consumer discretionary sector over the year. The strategy is sold in separate account and US mutual fund form and the recovery in emerging markets in 2016 should create a helpful backdrop for capitalising on the mutual fund’s excellent performance since launch.