This emerging markets fund has outperformed the market over the past 1, 5 and 10 years.That’s it | Wilnesh News
The global emerging markets funds managed by Aubrey Capital have delivered impressive returns over the past decade. What’s the key to its success? Laser focus on consumers. “In emerging markets, we focus on one thing and one thing only, and that’s the consumer,” Mark Martyrossian, director and head of distribution at Aubrey Capital, told CNBC Pro. This approach has helped the Aubrey Global Emerging Markets Opportunities Fund grow over the past year. It achieved a return of 13.8%, nearly double the MSCI Emerging Markets Index’s 8.2% gain. Over the past five years, the fund has gained 36.6%, compared with the benchmark’s return of 11.6%; over the past 10 years, the fund has gained 95.4%, compared with the MSCI index’s return of 33.8%. Aubrey’s investment approach is based on its global emerging markets strategy, which has nearly $600 million in assets under management. To be included in Aubrey’s portfolio, a company must derive the majority of its revenue or profits directly from consumers. Of the roughly 2,000 consumer-facing companies in emerging markets, Aubrey has invested in only about 35. Although he is a so-called “bottom-up investor” – analyzing the fundamentals of any particular stock before making a bet – Aubrey also focuses on the macro environment, steering clear of economic difficulties such as those in Turkey and South Africa that could dampen consumption The country where the payer spends. Türkiye’s economy has been in trouble over the past few years, with annual inflation rising to nearly 70%. In response, the country’s central bank raised interest rates to 50% this year. To curb inflation, rising interest rates typically squeeze consumers’ finances. “Consumers are not going to spend more money in a country that is in trouble,” said Martyrossian, who formerly worked in Hong Kong and has focused on China’s stock market for many years. The strategy’s focus on emerging market consumers also means it misses out on the biggest market trend of the past 18 months: artificial intelligence. For example, Aubrey’s fund is not investing in AI chip maker Taiwan Semiconductor Manufacturing Co., Ltd. even though the company has gained nearly 60% in the past year. “TSMC is a world-class, outstanding company,” Martyrossian acknowledged. “But it operates the foundries that make the chips. It’s a B2B business, not a B2C business.” Where is Aubrey investing? Nearly half of the Aubrey Global Emerging Markets Opportunities Fund is invested in India. Martyrossian said that while Indian stocks have hit record highs several times this year, future profit potential justifies current valuations. “So what we’re seeing in India right now is that the stock market is doing well, but the market is not looking ahead,” Martyrossian said. “What we’re seeing is a bunch of earnings and profitability emerging that makes today’s (share prices) not at all Not expensive.” One of the largest holdings is Varun Beverages, one of the largest Pepsi-Cola beverage bottling companies outside the United States. The stock is up more than 1,000% over the past five years. Even after trimming the position to stay within the strategy’s risk parameters, Varun remains one of Aubrey’s largest positions. VBL-IN 5Y Series “For many people in this world, having enough money to drink a soft drink is an ambition and a wish fulfillment. That’s why soft drinks are our theme,” he said. Varun isn’t the only beverage and fast-food company in Aubrey’s portfolio. Companies operating in Mexico such as Coca-Cola FEMSA, Arca Continental, Burger King franchisee Alesa and Brazil’s Arcos Dorados are also part of the portfolio. “We like the theme…these businesses are cleaning up,” he added. Real Estate The fund invests about 7% in Indian real estate developers such as Macrotech and DLF and focuses on the growing urban middle class. Both companies build luxury residential complexes and towns around Delhi and Mumbai. Martyrossian Similar to China, China’s urban population has increased from 35% to 60% since 2000. Meanwhile, India’s urban population has increased by 18% since 1960, a trend that has accelerated since the turn of the century. While he is cautious that India may not follow the same trajectory, he thinks the underlying themes apply. “Participation in the real estate industry … will be a continuing trend and one we are watching closely,” he said.
