Emerging Markets (ex-China)

Winner of Citywire Asia’s Best GEM Manager and GEM Fund House.

Winner of the Emerging Markets Equity Manager of the Year at the Professional Pensions Investment Awards. 

The Emerging Markets ex-China strategy aims to outperform its benchmark, MSCI Emerging Markets ex China Index, by 3% per annum over a three-year rolling period. It targets high returns and long term capital growth by investing in a focused portfolio of primarily equity and equity-related securities traded in Emerging Markets.

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Emerging Markets ex-China Strategy

The Emerging Markets ex-China strategy targets strong excess returns through fundamental bottom-up stock selection, within an integrated top-down macro framework.

The EM index has become dominated by China, a country that faces serious structural issues that are more akin to a developed market, including elevated leverage and deteriorating demographics. Its dominance inevitably crowds out better secular growth opportunities in smaller EMs. The EM ex-China universe is large, liquid and diverse, with many markets enjoying structural tailwinds in the form of younger demographics, attractive valuations and benign geopolitics. An ex-China mandate allows investment in more idiosyncratic opportunities which may otherwise be missed.

The following aspects of our investment process provide an edge and set the TT proposition apart from the competition:

  • Unconstrained and concentratedWe will invest where the best alpha opportunities present themselves across EM ex-China.
  • Top-down and bottom-up linkageTT’s Emerging Market process utilises a combination of top-down and bottom-up analysis. This linkage allows top-down factors to guide the team as to where to focus their resources to find attractively valued growth stocks.  
  • Focus on Free Cash FlowWhilst our fundamental company analysis considers multiple return and valuation metrics, we do have a specific focus on Free Cash Flow.  There are three core reasons for this: 

  1. Fickle capital flows can undermine a company’s ability to grow, especially in Emerging Markets. Balance sheet strength, particularly strong Free Cash Flow, provides greater visibility on growth potential. 
  2. Inflection points at times of declining capital investment and improving Free Cash Flow are often catalysts for improving returns to investors. 
  3. A focus on cash flow ensures an alignment of interests between minority and majority shareholders.  The Free Cash Flow ‘lens’ is a useful one in which to frame our engagement with company management.  
  • Active currency  management. TT has decades of experience managing FX and a consistent, positive record doing so. While currency is a decidedly secondary alpha bucket, its primary function is that it empowers our analysts, who know we can take out FX risk effectively, to analyse stocks more purely in local terms, as they should.
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