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Stewart Investors Global Emerging Markets Leaders - resilience in weaker markets

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • Fund hasn’t performed as well as the broader emerging markets over the past couple of years
  • A lack of exposure to Chinese tech firms hasn’t helped
  • We think the fund’s managers can deliver good long-term results

Our view

The team behind the Stewart Investors Global Emerging Markets Leaders Fund has a lot of experience. They’ve invested in emerging stock markets and used the same investment process for many years.

They look for companies that generate lots of cash and are in good financial health. It’s important they’re run by management teams that can be trusted to give an honest assessment of what’s going on in the business. We like the fact the team have been loyal to this process, and to the companies they invest in, for a long time.

This approach means the fund has tended to hold up relatively well when markets are weaker. But it’s tended to lag when markets rise quickly. This has happened over the past couple of years, but it worked well more recently when emerging markets fell and it’s an approach we expect to work well over the long term. There are no guarantees though and past performance isn’t a guide to future returns.

Stewart Investors have restricted inflows into the fund in order to keep it a manageable size. So it doesn’t currently feature on the Wealth 150+.

Fund review

Emerging stock markets have generally performed well over the past couple of years. The shares of technology companies, including large Chinese internet companies such as Alibaba and Tencent, have been some of the strongest performers.

The team doesn’t invest in these companies because they don’t meet their investment criteria. They also have some concerns about possible intervention from the Chinese government. They prefer to focus on companies they think are run in a more sustainable fashion.

This means the fund has missed out on some of the gains made in the technology sector. Over the longer term we think the team will identify some of the region’s best-performing companies and deliver good results. This isn’t guaranteed though.

Annual percentage growth
July 2013 -
July 2014
July 2014 -
July 2015
July 2015 -
July 2016
July 2016 -
July 2017
July 2017 -
July 2018
Stewart Investors Global Emerging Markets Leaders 0.2% -1.3% 20.3% 11.9% 4.7%
FTSE Emerging 4.0% -3.1% 16.8% 22.4% 5.7%
IA Global Emerging Markets 2.4% -6.6% 19.2% 24.1% 2.8%

Past performance is not a guide to the future. Source: Lipper IM to 31/07/2018

The team have found opportunities in other areas of the market. They’ve added new investments in companies they think have great long-term prospects but have recently been weaker. So they’ve been able to buy their shares at a low price.

This includes Turkish bank Akbank, which they think has a much better track record surviving times of crisis than other banks in the country.

Ultrapar, a Brazilian company that distributes fuel and makes specialty chemicals, was also added to the fund. The Brazilian stock market has recently been weak and impacted the performance of the company’s shares. But the team’s confident the company’s management team will drive long-term growth.

A large part of the fund, around 26%, is invested in India. The team thinks the country is home to some of the highest-quality companies in the region.

They’ve taken profits from some investments that have recently performed well. But they still have big investments in some Indian companies that provide IT services and solutions. This includes Tata Consultancy Services and Infosys. They like the fact these companies carry out a lot of business overseas, in areas such as Europe and the US, so they don’t rely purely on customers within India.

Key Investor Information

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.

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