FMOTY 2023: Spotlight on Global Emerging Market Equities

With the Fund Manager of the Year Awards around the corner, Money Management spoke with the finalists nominated for Global Emerging Market Equities.

The three finalists in the category are:

• FSSA Asian Growth Fund
• Lazard Emerging Markets Equity Fund
• Fidelity Asia Fund

Click here to view the full list of finalists.

The recovery narrative for global emerging markets (EMs) was receiving increasing investor attention, as developed economies continued to tackle inflationary pressures.

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Established in 1997, the Lazard Emerging Markets Equity Fund’s long history of EM investment was particularly crucial during the last two years as the tech growth bubble deflated.

“Key to our success has been our valuation discipline and our patience has really been rewarded over the last two years. We have a proven relative value process that seeks value creation through bottom-up stock selection,” said Ben Granbery, national manager of retail distribution at Lazard Asset Management.

The fund returned 8.24 per cent on a 12-month basis as of 31 March 2023, while the MSCI EM Index, in Australian dollar terms, returned just 0.53 per cent. 

Additionally, it outperformed the benchmark by over 9 per cent annualised on a two-year basis.

Granbery remained hopeful that stocks would continue their rebounding trend as economic growth improves and inflation decelerates.

“After the steep drop in equity markets overall in 2022 and the subsequent recovery over the past six months, we believe that emerging markets equities remain a mispriced asset class, with attractive valuations compared to historical levels,” he commented.

FSSA Asian Growth Fund was established in 2016, borrowing from FSSA Investment Managers’ investment history in Asia Pacific and global EMs for over 30 years. 

According to Richard Jones, director of FSSA Investment Managers, the $46 billion firm used a qualitative philosophy to identify quality companies in building concentrated, high-conviction portfolios.

“Rather than build complex financial models, we try to gain conviction around a company’s competitive moat, the sustainability of its earnings growth, and the integrity of its management,” he described.

“Given our emphasis on quality companies, we have historically outperformed in more challenging market conditions where due recognition is given to companies with strong franchises, recurring cash flows, and robust balance sheets.”

Andrew Mellor, director of consultant and researcher relations at Fidelity International, said the Fidelity Asia Fund implemented a concentrated approach to offer investors a high-conviction portfolio.

“Bottom-up stock selection drives investment returns and our analyst teams based on the ground across Asia and the emerging markets are a key advantage of this fund,” he told Money Management. 

The fund’s strong outperformance across one, three, five, and seven years was underpinned by a wide range of Asian stocks and sectors, particularly in China and India.

While the director maintained a cautious outlook on Asian equities due to geopolitical risks, he noted China’s economic reopening had notably improved global market sentiment. 

“We continue to monitor the market for interesting investment opportunities across Asia, and remain diligent on balance sheet strength, industry structure, pricing power and sensible management teams when selecting stocks,” Mellor continued.

Winners of the 2023 Fund Manager of the Year Awards will be announced on Thursday 22 June 2023 at a black-tie gala awards ceremony at The Star in Sydney.

Click here to buy tickets to the awards ceremony.