Emerging Markets Equities

Robeco first invested in an emerging market – Peru – back in 1930, just one year after the company was founded. In the years since, we’ve determined that emerging markets are constantly evolving and are not a homogeneous asset class. These differences among emerging market countries are an important source of alpha, and we employ an active country allocation framework to capture the differences in risks and opportunities between them.

Our disciplined investment process also enables us to harness the inefficiencies resulting from market biases in emerging markets.The market generally overpays for perceived high quality growth. Our fundamental stock selection analysis focuses on attractively valued companies with an underappreciated earnings outlook by the market. We use a quantitative model as a tool to exploit the behavioral biases of market participants such as overconfidence and herd behavior.

In emerging countries, markets are often driven by retail investors and short-term market noise. Our proprietary models are designed to benefit from these inefficiencies by applying a long-term investment view to uncover structural drivers.

Sustainability is integrated in both the top-down country analysis and bottom-up stock selection. As emerging markets often feature poor transparency, lower governance standards, human rights issues, and lack product safety standards, ESG analysis can identify non-financial risks and opportunities, allowing us to make better-informed investment decisions.

The strategy is managed by dedicated emerging market specialists with specific country coverage. Our Emerging Markets team follows a consensus approach, whereby all of the members work together to determine investment decisions. The head of the team was a founding member in 1994 and has one of the longest tenures in the global emerging market equity asset class. Embedded in Robeco's Global Fundamental Equities group of more than 60 investment professionals, the team cooperates closely with our China and Asia Pacific specialists based in Hong Kong and Shanghai.

The global emerging market strategy is diversified over approximately 80-90 stocks and targets an active share target of 70% or more. A concentrated global emerging market portfolio of 35-50 stocks and active share of >80% is also available.

This strategy promotes, among other characteristics, environmental and/or social characteristics, which can include exclusionary screening, ESG integration, ESG risk monitoring and Active Ownership. It is classified as Article 8 under the EU Sustainable Finance Disclosure Regulation (SFDR). 

The strategy integrates ESG factors into its investment process by analyzing the impact of financially material ESG factors to a company’s competitive position and value drivers. We believe this enhances our ability to understand long-term risks and opportunities of a company. If ESG risks and opportunities are significant, the ESG analysis could impact a stock’s fair value and the portfolio allocation decision. In addition to ESG integration, the strategy applies an exclusion policy and benefits from voting and engagement activities focused on specific themes such as climate change, aiming to improve a company’s sustainability profile. 

From a macroeconomic perspective, a key part of our fundamental analysis consists of comparing the economic, political and social strengths of emerging market countries. This evaluation includes issues such as a country's transparency, political stability, progress toward basic democratic principles, and protection of shareholder rights. Analysis of the ESG factors can lead to a country risk premium in the valuation analysis of individual stocks.