GLOBAL EMERGING MARKET EQUITIES

Selectively Navigating the Path to Emerging Market Opportunities

Why Emerging Markets?

Emerging markets equity exhibits the highest long-term expected return across the three public equity regions: U.S., non-U.S. and emerging markets. It is the only region that exceeds the long-term required rate of return (7% to 8%) of most North American institutional investors.

The emerging market opportunity centers on the impact of positive demographic change.
In approximate terms, of the world’s seven billion people, six billion live in less-developed countries. As the population rises toward its forecast nine billion by 2030, the vast majority of these additional inhabitants will live in countries that are considered to be “emerging.”
Examples include the emerging middle class and increased consumer purchasing power.
Rising standards of living and emerging middle classes bring with them commerce and consumerism, while the younger profile and increasingly educated nature of the emerging markets workforce supports the development of dynamic and entrepreneurial businesses.

Population Growth

Most population growth will come from less developed countries.
Source: United Nations, Department of Economic and Social Affairs, Population Division (2015), World Population Prospects: The 2015 Revision, Total Population, both sexes, using medium fertility https://esa.un.org/unpd/wpp/Download/Standard/Population/.

Why Emerging Markets?

Why Emerging Markets?

Emerging markets equity exhibits the highest long-term expected return across the three public equity regions: U.S., non-U.S. and emerging markets. It is the only region that exceeds the long-term required rate of return (7% to 8%) of most North American institutional investors.

The emerging market opportunity centers on the impact of positive demographic change.
In approximate terms, of the world’s seven billion people, six billion live in less-developed countries. As the population rises toward its forecast nine billion by 2030, the vast majority of these additional inhabitants will live in countries that are considered to be “emerging.”
Examples include the emerging middle class and increased consumer purchasing power.
Rising standards of living and emerging middle classes bring with them commerce and consumerism, while the younger profile and increasingly educated nature of the emerging markets workforce supports the development of dynamic and entrepreneurial businesses.
The emerging market opportunity centers on the impact of positive demographic change.
In approximate terms, of the world’s seven billion people, six billion live in less-developed countries. As the population rises toward its forecast nine billion by 2030, the vast majority of these additional inhabitants will live in countries that are considered to be “emerging.”
Examples include the emerging middle class and increased consumer purchasing power.
Rising standards of living and emerging middle classes bring with them commerce and consumerism, while the younger profile and increasingly educated nature of the emerging markets workforce supports the development of dynamic and entrepreneurial businesses.

Population Growth

Most population growth will come from less developed countries.
Source: United Nations, Department of Economic and Social Affairs, Population Division (2015), World Population Prospects: The 2015 Revision, Total Population, both sexes, using medium fertility https://esa.un.org/unpd/wpp/Download/Standard/Population/.

A strategic allocation to emerging markets offers potential for increased return over the long-term as emerging economies develop.

In fact, leading endowments Yale, Harvard and Stanford have significantly more exposure to emerging market equities than many other investors. Might they know something the rest of us are missing? Learn more in our latest insight.

A strategic allocation to emerging markets offers potential for increased return over the long-term as emerging economies develop.

In fact, leading endowments Yale, Harvard and Stanford have significantly more exposure to emerging market equities than many other investors. Might they know something the rest of us are missing? Learn more in our latest insight.

A strategic allocation to emerging markets offers potential for increased return over the long-term as emerging economies develop.

In fact, leading endowments Yale, Harvard and Stanford have significantly more exposure to emerging market equities than many other investors. Might they know something the rest of us are missing? Learn more in our latest insight.

What Do The Ivies Know?

Importance of Selectivity

However, investors must be mindful of emerging market challenges.

Geopolitical and non-financial risks must be carefully assessed. Immature legal and political systems often mean inadequate levels of minority shareholder protection and economic volatility. Other headwinds include young institutions, data quality, rule of law (or lack therof), inflation, liquidity and social frictions.

How should investors navigate the ever-changing path to emerging market opportunities?

How We Approach Emerging Markets
Glen Finegan, Head of Global Emerging Market Equities
Selectivity is paramount to success.

When investing in emerging markets, it is essential to focus on high-quality companies. We believe this is best achieved using a bottom-up, risk-aware approach and focusing more on what can go wrong than what might go right. With an unwillingness to compromise on quality, long-termism is paramount and company history a meaningful guide.

Investing in companies is not just about financial attributes; it is also about investing in people. When investing in emerging markets, we believe it is always wise to question who owns the company, why they own it and how they operate.”

- Glen Finegan, Head of Global Emerging Market Equities
Understand the people behind the business.

Alignment with management and controlling shareholders is important, in addition to a keen understanding of businesses’ nonfinancial risks (including environmental, social and governance considerations). We seek to better understand the people behind the business - and invest alongside those with long track records of integrity and financial delivery.

Importance of Selectivity

Importance of Selectivity

However, investors must be mindful of emerging market challenges.

Geopolitical and non-financial risks must be carefully assessed. Immature legal and political systems often mean inadequate levels of minority shareholder protection and economic volatility. Other headwinds include young institutions, data quality, rule of law (or lack therof), inflation, liquidity and social frictions.

How should investors navigate the ever-changing path to emerging market opportunities?

How We Approach Emerging Markets
Glen Finegan, Head of Global Emerging Market Equities
Selectivity is paramount to success.

When investing in emerging markets, it is essential to focus on high-quality companies. We believe this is best achieved using a bottom-up, risk-aware approach and focusing more on what can go wrong than what might go right. With an unwillingness to compromise on quality, long-termism is paramount and company history a meaningful guide.

Investing in companies is not just about financial attributes; it is also about investing in people. When investing in emerging markets, we believe it is always wise to question who owns the company, why they own it and how they operate.”

- Glen Finegan, Head of Global Emerging Market Equities
Understand the people behind the business.

Alignment with management and controlling shareholders is important, in addition to a keen understanding of businesses’ nonfinancial risks (including environmental, social and governance considerations). We seek to better understand the people behind the business - and invest alongside those with long track records of integrity and financial delivery.

Benchmark-Agnostic Approach

Without reference to an index, our approach to emerging markets constantly weighs up the risk of losing money in absolute terms rather than relative underperformance to an index.

Taking a global, benchmark-agnostic approach allows for investment in good-quality companies, wherever they are listed, that are building businesses in emerging markets. Blurred lines between emerging market companies and global companies means it is sometimes possible to gain exposure to emerging markets through developed market-listed companies.

A global research effort blurs boundaries between emerging and developed market opportunities as we believe neither should be analyzed in isolation.”

- Stephen Deane, Portfolio Manager

The increasing trend of emerging market equity allocations via passive vehicles, we believe overlooks a number of key drawbacks of investing based on the benchmark and the potential benefits of active management. Learn more in our investment insight.

Benchmark-Agnostic Approach

Benchmark-Agnostic Approach

Without reference to an index, our approach to emerging markets constantly weighs up the risk of losing money in absolute terms rather than relative underperformance to an index.

Taking a global, benchmark-agnostic approach allows for investment in good-quality companies, wherever they are listed, that are building businesses in emerging markets. Blurred lines between emerging market companies and global companies means it is sometimes possible to gain exposure to emerging markets through developed market-listed companies.

A global research effort blurs boundaries between emerging and developed market opportunities as we believe neither should be analyzed in isolation.”

- Stephen Deane, Portfolio Manager

The increasing trend of emerging market equity allocations via passive vehicles, we believe overlooks a number of key drawbacks of investing based on the benchmark and the potential benefits of active management. Learn more in our investment insight.

Investment Solutions

The Janus Henderson Global Emerging Market Equities Team follows a differentiated process that is shaped by the view that selectivity matters.

Employ an absolute mindset with a risk-focused approach.

Our approach to emerging markets constantly weighs up the risk of losing money in absolute terms rather than relative underperformance to an index. This philosophy has been shaped by years of investing in the asset class and properly balancing the opportunity against risk. Indeed, we believe long-term performance is defined as much by what you don’t own as what you do.

We define risk as the permanent loss of capital, not underperforming a benchmark.”

- Michael Cahoon, Portfolio Manager
INVESTMENT STRATEGY
Janus Henderson Emerging Markets Equity

We are fundamental, bottom up investors who seek to create high conviction portfolios of reasonably valued, high-quality companies. We ascribe to the following six core investment principles of the strategy’s investment philosophy:

  • Bottom up
  • Benchmark agnostic
  • Long-term focused
  • Emphasis on quality companies
  • Strict valuation discipline
  • Investing with an absolute,
    not relative return mindset

Investment Solutions

Investment Solutions

The Janus Henderson Global Emerging Market Equities Team follows a differentiated process that is shaped by the view that selectivity matters.

Employ an absolute mindset with a risk-focused approach.

Our approach to emerging markets constantly weighs up the risk of losing money in absolute terms rather than relative underperformance to an index. This philosophy has been shaped by years of investing in the asset class and properly balancing the opportunity against risk. Indeed, we believe long-term performance is defined as much by what you don’t own as what you do.

We define risk as the permanent loss of capital, not underperforming a benchmark.”

- Michael Cahoon, Portfolio Manager
INVESTMENT STRATEGY
Janus Henderson Emerging Markets Equity

We are fundamental, bottom up investors who seek to create high conviction portfolios of reasonably valued, high-quality companies. We ascribe to the following six core investment principles of the strategy’s investment philosophy:

  • Bottom up
  • Benchmark agnostic
  • Long-term focused
  • Emphasis on quality companies
  • Strict valuation discipline
  • Investing with an absolute,
    not relative return mindset
  • Bottom up
  • Benchmark agnostic
  • Long-term focused
  • Emphasis on quality companies
  • Strict valuation discipline
  • Investing with an absolute,
    not relative return mindset