Emerging Markets

Portfolio Manager Alice Popescu provides a two-minute summary of her Q3 2023 emerging markets investment commentary, including her contrarian perspectives on China.

7 min read | The Altrinsic Emerging Markets Opportunities portfolio declined 2.4% (-2.6% net) compared to the 2.9% decline of the MSCI Emerging Markets Index, as measured in US dollars. Performance throughout the period varied markedly within emerging market, with a stark divergence between EMEA and Latin America. Performance across the market capitalization spectrum also varied, with small and mid-cap EM stocks substantially outperforming the broad EM index. Overall, EM equities outperformed developed markets in the third quarter.

11 min view | This video features a conversation between Sara Sikes (Head of Client Experience) and Alice Popescu (Portfolio Manager on our Emerging Markets Opportunities strategy, which is approaching its three-year track record). The discussion succinctly covers Alice’s philosophy regarding EM investing, her personal and professional journey, opportunities and risks we see in the EM landscape, and insights from recent research trips abroad. Click 'Read more' below to access the video.

9 min read | The Altrinsic Emerging Markets Opportunities portfolio gained 3.6% (3.3% net) this quarter, outperforming the MSCI Emerging Markets Index's 0.9% return, as measured in US dollars. Performance throughout the period varied markedly across emerging markets, with a particularly stark divergence between Asia and Latin America. China’s post-pandemic recovery has been challenging despite the initial reopening excitement, with underwhelming economic indicators driving significant underperformance. Meanwhile, economic activity in Latin America proved far better than expected, with many upward revisions and strong performing currencies in key markets, including Brazil and Mexico.

5 min read | by Alice Popescu | Earlier this year, I spent two weeks on the ground in India meeting with over 40 corporate and political contacts. The major themes that emerged from the discussions were related to Semi Urban Rural (SURU) developments, the rise of domestic manufacturing clusters, and an underappreciated energy transition. The trip reinforced our belief that India offers an abundance of attractive, long-term investment opportunities among undervalued and often overlooked companies – perhaps surprising to some given its position as the world’s largest democracy (and most populated country).

9 min read | The Altrinsic Emerging Markets Opportunities portfolio gained 5.6% (5.4% net) this quarter, outperforming the MSCI Emerging Markets Index's 4.0% return, as measured in US dollars. Performance throughout the period varied markedly within emerging markets. The year began with strength in North Asian (China, Taiwan, and Korea) large caps on momentum from China’s reopening. The robust start tailed off as corporate scandals and political headlines drove underperformance in the large markets of India and Brazil. Additionally, turmoil in the global banking sector following the collapse of Silicon Valley Bank (SVB) made its mark on EM equities, though in a more subdued manner.

Emerging markets are often defined by macro dynamics, but the fourth quarter was especially active on the political and policy fronts. A few key examples include: 1) China’s 20th Party Congress (and the eventual surprise unwinding of zero-COVID policies), 2) Brazil’s presidential elections (and the social unrest that followed), 3) signs of a peaking US dollar (and its effects on global currency valuations), and 4) easing inflation in the US (which could be followed by a shift in monetary policy with carry-over effects in emerging markets). Despite the unsettled circumstances, emerging market equities performed in line with developed markets.

A confluence of factors, including inflationary pressures, tightening monetary policy, weakening economic growth, and intensifying geopolitical unrest, continued to challenge emerging markets (MSCI EM -11.6%) in the third quarter. The Altrinsic Emerging Markets Opportunities portfolio declined 8.2%, outperforming the MSCI Emerging Markets Index by 3.4%, as measured in US dollars. Outperformance was derived from individual stock selection in the financials and consumer sectors, our differentiated and overweight positions in Brazil and Mexico, our underweight exposure to China, and specific stock selection in China.

Uncertainty stemming from inflationary concerns, tightening central bank policies, and prospects of slowing economic activity weighed on emerging markets.  Unlike previous drawdowns, emerging market equities fared better than broad markets (MSCI EM -11.4%, MSCI ACWI’s -15.7%).  The Altrinsic Emerging Markets Opportunities portfolio outperformed the MSCI Emerging Markets Index in the second quarter by 0.6%, as measured in US dollars.   Like most equity portfolios, ours was not immune to the market downdrafts, but we are confident in our positioning and encouraged by the investment propositions offered by a growing number of companies with strong long-term fundamentals and attractive valuations.  Key contributors to our relative outperformance included our differentiated exposure to real estate, our overweight position and select investments in India, and our underweight exposures in materials and information technology.

3 min read | At Altrinsic Global Advisors, our emerging markets equity strategy is managed with a bottom-up, fundamentals-driven approach and an objective to identify high quality, underappreciated investment opportunities across the cap spectrum, truly reflecting the DNA of the EM asset class.  Today, as we assess how our differentiated perspectives and exposures played out during the first year of our strategy, we find great alignment with our previous views (which we outlined in the September 2021 white paper report entitled Exploring the True DNA of Emerging Markets).