Entry Points | Emerging Markets: A Compelling Opportunity

Brandon Smith, CFA, CAIA, Portfolio Analyst at Boston Partners highlights the opportunity in Emerging Markets equities, allocator challenges, and a potential solution for a strategic allocation to the asset class.  For questions or additional information, please contact us.

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Emerging Markets: A Compelling Opportunity

Catalysts in Play: Few asset classes have enjoyed tailwinds as powerful or as enduring as those that characterize emerging market equities. The combination of higher productivity growth and higher working-age population growth should be familiar to global investors with long-term investment timelines.

Entry Points: However, it’s the disparity between the GDP growth in emerging markets – in which EM economies account for approximately 40% of global GDP – and the total market capitalization of EM equities, representing just 14% of the global stock market according to International Monetary Fund data, that should appeal to buy-and-hold investors. The catch is that the volatility inherent in developing economies can motivate behaviors that degrade long-term performance.

Strategic vs. Tactical Allocations:  It’s not uncommon, for instance, for asset owners to view EM exposures as a tactical opportunity fueled by short-term developments. Data, however, underscores the challenges of trying to time the market, particularly to move in and out of developing markets.

 

Volatility vs Compounded Returns: Given the volatility, asset owners may be persistently under-allocated. And the volatility, on its own, can lower the compound annual returns for EM strategies over time.

Search for Solutions: We believe it makes sense for Emerging market equities to be a strategic holding in a diversified portfolio. The challenge confronting most investors is how to stay invested when there is high volatility in the asset class? Strategies that provide EM exposures with reduced volatility could be a potential solution. This would enable allocators the ability to remain invested in the asset class and avoid missing out on the potential return stream EM equities can provide.  

Active Strategy: The Boston Partners Emerging Markets Dynamic Equity Strategy seeks to provide an EM like return over a full market cycle with reduced volatility.  This is accomplished by taking long positions in stocks identified as being undervalued and high quality, and short positions in such stocks identified as overvalued and low quality.

 

For questions or additional information, please contact us.

Boston Partners Global Investors, Inc. (“Boston Partners”) is an investment adviser registered with the SEC under the Investment Advisers Act of 1940. Registration does not imply a certain level of skill or training. The views expressed in this commentary reflect those of the author as of the date of this commentary. Any such views are subject to change at any time based on market and other conditions and Boston Partners disclaims any responsibility to update such views. Past performance is not an indication of future results. Discussions of securities, market returns, and trends are not intended to be a forecast of future events or returns.

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John Zhao

Research Analyst

Mr. Zhao holds a Bachelor of Arts degree from the Richard Ivey School of Business at Western University and an MBA from Harvard Business School. He has six years of industry experience.

Mr. Zhao is an emerging markets industry analyst with Boston Partners specializing in fundamental research of stocks held in our Emerging Markets Equity products. Prior to his role at Boston Partners, Mr. Zhao worked as a Private Equity Associate in Salt Lake City and an Investment Banking Associate in Hong Kong.

Pedro Folkerts

Research Analyst

Mr. Folkerts was a student at Tufts University, where he earned a B.A. degree in economics and international relations.

Mr. Folkerts is an equity research analyst with Boston Partners. Mr. Folkerts is focusing his analytical efforts on Emerging Markets equities.

Jonah Frank

Research Analyst

Mr. Frank was a student at Boston University where he earned a B.S. degree in business administration with a concentration in finance and management information systems.

Mr. Frank is an equity research analyst with Boston Partners. Mr. Frank is focusing his analytical efforts on equities within a variety of cyclical industries.

Edward Stansky

Research Analyst

Mr. Stansky holds a B.S. degree in economics from Duke University and a M.B.A. from NYU’s Stern School of Business. He has five years of investment experience.

Mr. Stansky is an equity research analyst with Boston Partners and has generalist coverage responsibilities. Prior to this role, he worked as a high yield and leveraged loan analyst at DDJ Capital and as an investment banking analyst in debt advisory at BofA Merrill Lynch.

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Marlon Thompson

Equity Trading Assistant

Mr. Thompson holds a B.S. degree in finance from Boston College. He has ten years of industry experience.

Mr. Thompson is an equity trading assistant for Boston Partners. Prior to assuming this role, he worked as a portfolio operations analyst. Before joining the firm, Mr. Thompson held several roles including Vice President of Operations at Benefit Street Partners LLC and positions at International Fund Services (IFS) and Pioneer Investments.

Kara Pattipati, CFA

Relationship Manager

Ms. Pattipati holds an M.A. in International Relations from the University of St. Andrews. She holds the Chartered Financial Analyst® designation. Ms. Pattipati has nine years of industry experience.

Ms. Pattipati is a member of the Relationship Management team at Boston Partners. She works with many of our key domestic and international clients in a client service and relationship manager capacity. Prior to joining Boston Partners in 2016, she was a business development associate at Geode Capital Management.

Elizabeth Sheerin

Relationship Manager

Ms. Sheerin holds a B.S. degree in business management from Babson College. Ms. Sheerin has twelve years of industry experience

Ms. Sheerin is a member of the Relationship Management team at Boston Partners and she joined this team in 2011.  She works with many of our key domestic and international clients in a client service and relationship manager capacity. Prior to joining our firm, she was a Client Service Representative at Putnam Investments. She also held several financial services related internships including working for Merrill Lynch Global Wealth Management and State Street Global Advisors.

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