Emerging Markets Equity Commentary | Q4 2018

Quarterly Letter

The fourth quarter was very difficult for global markets, as prices for most risk asset classes experienced elevated volatility.  Investors in emerging markets were faced with shifting growth and risk dynamics due to several macro factors, including an unclear endgame for the U.S./China trade war, decelerating U.S. economic growth, and new post-election reform priorities in Brazil and Mexico.  On the policy front, emerging market central bankers and policy makers will have to contend with the transition from synchronized global growth to moderating growth and more inwardly focused decision making by their developed-market counterparts.  On a positive note, we welcome the recent broadening of market leadership away from a small group of highly valued Chinese internet names that had become ubiquitous holdings amongst our emerging market peers and had overwhelmingly dictated the asset class’s performance since 2016.  As we survey the emerging market landscape, valuations now reflect far less-sanguine assumptions about growth.  Against this backdrop, we have used the recent volatility to add to names that had fallen to attractive discounts to our estimation of their intrinsic values.