Emerging Markets with an Edge

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  • 02 mins 28 secs
Under-owned segments of emerging markets, such as frontier and small-cap equities and China A-Shares, provide global investors with opportunities to pursue alpha.

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Emerging Markets with an Edge

Casey Preyss: We see a very rich opportunity set across emerging markets. One would be frontier markets, such as Vietnam. Secondly would be emerging market small-cap companies. Finally, I would highlight China A-shares as a market that we think will continue to gain importance for global investors. We find that getting out on the ground in emerging markets is critical to investing. Three weeks ago, we visited Saigon. When you get outside of the hotel, and really just walk around, you quickly identify how underpenetrated the retail sector is and remains in Vietnam today. When you look at the entire country of Vietnam of 90 million people, there’s only 30 to 40 modern retail malls out there today, so the consumer sector remains a sector where we find very exciting opportunities. Emerging market small-cap companies represent about 30 percent of the global small-cap universe. However, they represent a much smaller percentage of the typical investor’s portfolio, and there are very attractive quality growth companies within the emerging market small-cap space. So, it remains a very under-owned, inefficient market, which really provides opportunities for investors to get on the ground and do the fundamental research. Vivian Lin Thurston: China A-shares market, in my view, is one of the most attractive and unique asset classes and markets in the world. China A-shares market is highly inefficient. Therefore, we believe, the China A-share market is a very good opportunity for active managers like William Blair. From the personal perspective, I was born and raised in China. Therefore, I have no language barrier when I interact with company management, which is a very helpful advantage to have. And there are some insights when you interact with the local government and also the local management team in their local language. You can get some important nuances. I got to see all those companies on the ground and even see their operations firsthand. Casey Preyss: At William Blair, we’re focused on quality growth investing in emerging markets because it works. And we’re looking for companies that have good corporate governance, good management capabilities to reinvest those high returns back into the business and to be able to continue to grow in the future and deliver shareholder value. DISCLOSURE Filmed May 2018 The views and opinions expressed herein are those of the speakers as of the date of publication, are subject to change without notice as economic and market conditions dictate, and may not reflect the views and opinions of other investment teams within William Blair. Factual information has been obtained from sources we believe to be reliable, but its accuracy, completeness, or interpretation cannot be guaranteed. This material may include estimates, outlooks, projections, and other forward-looking statements. Due to a variety of factors, actual events may differ significantly from those presented. This video has been provided for informational purposes only and should not be considered as investment advice or a recommendation of any particular strategy or investment product, or as an offer to buy or sell any securities or related financial instruments in any jurisdiction. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions. Investing involves risks, including the possible loss of principal. Equity securities may decline in value due to both real and perceived general market, economic, and industry conditions. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. The securities of emerging market companies may be subject to greater volatility and less liquidity than companies in more developed markets. Any investment or strategy mentioned herein may not be suitable for every investor. Charts or graphs referenced herein are provided for illustrative purposes only and are not indicative of the past or future performance of any William Blair product or strategy. Past performance is not indicative of future results. The MSCI ACWI Small Cap Index is a free float-adjusted, market capitalization-weighted index that captures small cap representation across developed and emerging markets. The index is unmanaged, does not incur fees or expenses, and cannot be invested in directly. Copyright © 2018 William Blair. “William Blair” refers to William Blair Investment Management, LLC. William Blair is a registered trademark of William Blair & Company, L.L.C.