Glovista Fundamental Emerging Market Equity Strategy* is a bottom-up investment strategy with an 11-year track record. The strategy leverages our proprietary corporate lifecycle-based investment framework (ILC) that fosters investment idea generation across the corporate maturity spectrum and promotes consistency and repeatability in the investment decision-making process.
Strategy Objective
The strategy’s objective is to generate alpha over a market cycle while offering a bottom-up driven and core-oriented equity exposure to emerging markets.
Strategy Implementation
The strategy holds 70-90 stocks and is benchmarked against relevant EM benchmark indices. The active risk of the portfolio has ranged between 3-6%, with approximately 80% of the returns coming from stock specific sources.
The strategy aims at keeping index relative positions on lifecycle, country and sector to within +/- 5%. This is a soft rule that at times is breached, according to our varying conviction levels concerning the outlook. Our process also draws on proprietary top-down models that allow for the application of informed geographic, stylistic and sectoral tilts when they align with our process’ bottom-up insights. The sizing of individual positions preserves active weights between +/- 3%. Such sizing metrics allow for the portfolio’s overall risk to be diversified normally across positions.
Investment Process
The proprietary corporate lifecycle-based investment framework (ILC) has been built and improved upon by Al and Sudin since 2005. The ILC framework’s core tenet is that wealth creation principles vary depending on where a company falls within its maturity cycle. This process results in a steady supply of investment ideas within each stage of the maturity spectrum.
The investment process consists of three stages: screen, analyze, and construct.
- The screening stage starts with the quantitative classification of all global companies into one of four stages of a corporate’s maturity cycle; Growth (G), Cash Cow (CC), Fading Winner (FW) and Restructuring (R). Owing to their unique profile, financial stocks are analyzed as a distinct group. Companies are then screened relative to peers within their current stage based on the value creation tenets believed to drive positive outcomes. Such classification and screening of stages leads to the creation of an idea pool for the application of fundamental company-level due diligence.
- The analysis portion entails fundamental reviews of companies within the idea pool. The analysis stage begins with the verification of data inputs and classification, followed by in-depth due diligence on company financials, strategy, competitive landscape, and value creation potential.
- The construction step dovetails insights from our macro models and our ILC framework to inform portfolio actions. Portfolio holdings with diminished potential are replaced with names from the idea pool to express any changes in our team’s views.
