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Decline

Opportunity: Emerging markets

The new emerging markets epoch

Macro fundamentals in emerging markets have been transformed in the past two decades with leading global companies to choose from, and rapidly developing sectoral and regional themes reshaping the global investment landscape.


Why emerging markets?

Companies in leading emerging markets are becoming regional and global leaders in key industries undergoing rapid technological change, including semiconductors, batteries, renewable energy and fintech.

In pure economic terms, emerging markets are well placed to take the lead in the next global equity upcycle. Low core inflation, an advantageous demographic structure underpinning steady growth in consumption and wealth accumulation, growing foreign exchange reserves, and trade surpluses. Prudent fiscal policies characterize our favored emerging economies in Central Europe, Latin America and Asia, and these positive attributes are reflected in borrowing costs and volatility that have converged with developed markets.

We believe this set-up is unique in the turbulent history of emerging markets investing and represents an opportunity to rebalance your portfolio as the Earth’s economic axis tilts once more.

Jaap van der Hart - Portfolio Manager

Jaap van der Hart
Portfolio Manager

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Companies in leading emerging markets are starting to surface as global leaders

Why now?

Investors remain underweight many of the world’s most innovative economies and as a result they are missing direct exposure to some of the best growth companies for long-term investors.

From a macroeconomic perspective, the advantages developed markets have enjoyed in the past decade have evaporated with the fight against inflation. Quantitative easing has stopped or is disappearing, real rates are normalizing, and emerging market fundamentals are superior.

Volatility, which has traditionally been a weakness of emerging markets, is now the same as developed markets while valuation metrics show emerging markets trading at a historic discount.

Compelling spreads

Compelling spreads

The left-hand chart shows the valuation spread of the MSCI World Index vs. the MSCI Emerging Market Index. The valuation spread is based on four bottom-up-calculated multiples (price-to-book, price-to-earnings, price-to-cashflow, and price-to-dividend). For each multiple the valuation ratio of the MSCI Emerging Markets Index is divided by the same valuation ratio for the MSCI World Index. The right-hand chart shows the five-year rolling standard deviation in MSCI Emerging Market Index and the MSCI World Index. Source: Robeco, MSCI, August 2023.

Why Robeco?

Robeco’s emerging markets team has unrivaled experience with stable investment teams since the foundation of fundamental emerging market investing in 1994 and quantitative emerging market investing in 2006. This consistency and long track record also mean we leverage a rich source of country, sector and stock data. Bolstered with renowned sustainability and next generation quant expertise, Robeco can find the best opportunities in the vast emerging market investment universe.

Research driven

Research driven

Our multi-decade track record in emerging markets investing has been built on the foundations of proprietary, award-winning research. We find an edge at region, country or sector level, and rely on our research analysts and sustainability experts to find the best opportunities.

Value tilt

Value tilt

Emerging markets are the most fertile pastures for value hunters and we manage our strategies with a value tilt. Turnaround plays and companies with embedded competitive advantage that isn’t yet priced-in by domestic or international investors can be found with rigorous research and local knowledge.

Quant

Quant

Quantitative solutions exploit deeply entrenched cognitive biases that afflict investors. Our disciplined, transparent and systematic approach keeps emotions at bay and takes advantage of market inefficiencies driven by human behavior. This is how we deliver superior risk-adjusted performance for our clients in the long run. In addition, our quant strategies allow for extensive customization along various risk, return and sustainability dimensions.

Sustainability

Sustainability

Robeco has long been a leader in SI, taking sustainability into consideration since 2001 and integrating ESG factors since 2011. Assessing existing and potential ESG risks and opportunities helps us make better-informed investment decisions.

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Important information This disclaimer applies to any documents and the verbal or written comments of any person in presentations or webinars on this website and taken together is referred to herein as the “Information”. The services to which the Information relate are NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws and must not be relied or acted upon by any other persons. This Information does not constitute an offer to sell, or a solicitation of an offer to buy, any financial product, and may not be relied upon in connection with the purchase or sale of any financial product. You are cautioned against using this Information as the basis for making a decision to purchase any financial product. To the extent that you rely on the Information in connection with any investment decision, you do so at your own risk. The Information does not purport to be complete on any topic addressed. The Information may contain data or analysis prepared by third parties and no representation or warranty about the accuracy of such data or analysis is provided.
In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management UK Limited (“RIAM UK”) is authorised and regulated by the Financial Conduct Authority. RIAM UK, 30 Fenchurch Street, Part Level 8, London EC3M 3BD (FCA Reference No:1007814). The company is registered in England and Wales under Ref No. 15362605.

In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management B.V. is authorised as a manager of UCITS and AIFs by the Netherlands Authority for the Financial Markets and subject to limited regulation in the UK by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.