Emerging Market Fund Excels with 95.4% Decade Gain, Focus on India

Key Takeaway

• Aubrey Capital's Global Emerging Markets Opportunities Fund outperforms MSCI Index with a focus on consumer-driven companies, boasting returns of 13.8% over the past year, 36.6% over five years, and 95.4% over a decade.
• The fund's selective strategy invests in about 35 of approximately 2,000 consumer-facing companies in emerging markets, avoiding economically challenged countries like Turkey and South Africa.
• Nearly half of the fund's investments are in India, capitalizing on the country's market valuations and future earnings potential through strategic holdings in sectors like beverages and real estate.

Consumer Focus Drives Returns

Aubrey Capital's Global Emerging Markets Opportunities Fund has significantly outperformed its benchmark, the MSCI Emerging Market Index, over various time frames, including the past year, five years, and decade. This success is attributed to the fund's singular focus on consumer-driven companies in emerging markets. Mark Martyrossian, a director at Aubrey Capital, emphasized the importance of this consumer-centric approach, which has guided the fund to impressive returns of 13.8% over the past year, 36.6% over five years, and 95.4% over a decade, markedly outpacing the MSCI index's performance.

Selective Investment Strategy

Aubrey Capital's investment strategy is highly selective, focusing on companies that derive the majority of their revenue or profit directly from consumers. Out of approximately 2,000 consumer-facing companies in the emerging markets universe, Aubrey invests in about 35. The fund avoids investing in countries with economic challenges, such as Turkey and South Africa, where consumer spending may be adversely affected. This cautious approach extends to sectors outside the consumer focus, with the fund notably not investing in artificial intelligence trends, such as Taiwan's TSMC, despite its significant market rally.

Strategic Holdings and Market Outlook

Nearly half of the fund's investments are in India, reflecting a bullish outlook on the country's future earnings potential and market valuations. Martyrossian highlighted the success of Varun Beverages, a top holding, which has seen a substantial increase in value. The fund also invests in real estate developers like Macrotech and DLF, targeting the growing urban middle class in India. This strategy draws parallels with China's urbanization trend and aims to capitalize on similar growth in India.

Emerging Markets and Global Investment Trends

The broader emerging markets and global investment landscape are experiencing shifts, with a focus on value investment strategies in Asia, driven by a higher-for-longer interest rate environment. This has led to increased interest in cheap Chinese stocks, corporate reforms in Japan and South Korea, and India's domestic-driven equities. The changing global economic conditions, including the Federal Reserve's policy adjustments, have influenced investment flows and strategies across emerging markets, with fund managers seeking opportunities in sectors less affected by global monetary policies.

Street Views

• Mark Martyrossian, Aubrey Capital (Bullish on emerging markets consumer sector):

  "We look at just one thing in emerging markets, only one thing, and that’s the consumer." "The consumer is just not going to spend that extra buck in the country where the economy is troubled."