Presenting the FSSA Global Emerging Markets Focus Fund
FOR PROFESSIONAL INVESTORS ONLY
The end of 2022 marked the five-year anniversary of the launch of the FSSA Global Emerging Markets Focus Fund.
In this Fund in Five, we talk to fund manager Rasmus Nemmoe, to look at the portfolio from five angles and see what makes it different to its peers – and why investors should be turning to emerging markets.
Asset class
1
2
Process
3
Differentiator
4
Team
5
Track record
IMPORTANT INFORMATION
Investing in 40-45 companies, the FSSA Global Emerging Markets Focus Fund invests at least 70% in shares of large and mid-sized companies based in emerging markets.
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Despite the volatility seen in the region last year, Nemmoe describes this as an excellent buying opportunity and that emerging markets still offer diversification benefits to existing developed market investors.
“Global emerging markets is a broad market with many attractive businesses, but these are not usually well represented in the index,” he says. “As a result having an active stance is key.”
Given the size and scale of economies, China and India currently make up over 60% of the fund’s assets under management. Nemmoe says most long-term prospects in the region are to be found in the more domestically demand-orientated economies.
Nemmoe says the investment process and approach adopted by the fund has been used by the team for the past 30 years.
Adopting a benchmark agnostic approach, with an active share of about 90%, Nemmoe says that quality of management is critical when it comes to selecting companies.
He says: “Quality starts with people, so we spend a lot of time assessing the management teams, their track record, how they have executed and how they are incentivised. In addition to corporate governance, we look for companies with strong business models, with solid long-term prospects, competitive advantages and cash generation.”
Nemmoe says company meetings are integral to the process at FSSA, with the managers meeting 1,500 to 1,600 companies every year.
* Source: FSSA Investment Managers, as at 28 February 2023
Launch
28 SEP ’17
Fund size*
£50M
OCF
0.8%
Current holdings
44
While the fund is not labelled ESG, Nemmoe says it is something that has long been embedded in its investment process.
“Our views are informed by these meetings and what we see on the ground,” says Nemmoe. “It is management and franchise quality that ends up making the portfolio, and this is how we have managed money in the region for the last 30 years.”
Despite a high active share, Nemmoe adds the team aim to keep portfolio activity low, targeting a turnover ratio of 15-25%, which is indicative of an investment horizon of four to six years.
“We think about sustainability and ESG in the same way we think about quality,” he says. “To us, it amounts to the same thing in terms of alignment of interest.”
No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment. RWC Partners Limited is authorised and regulated by the Financial Conduct Authority.
The FSSA investment team consists of more than 20 investment professionals based in Hong Kong and Singapore.
Nemmoe joined FSSA in October 2016 and has 14 years of investment experience focusing on global emerging market equities.
“It’s a flat structure, with everyone on the team first and foremost an analyst, all of who write and produce research,” says Nemmoe. “There are no sector responsibilities, with everyone instead focused on countries and regions.”
With all members of the team contributing, Nemmoe describes the fund as adopting a “best ideas” approach, with the overlap of holdings with other strategies run by the group as being high.
Founded by Angus Tulloch in 1988, FSSA Investment Managers was formerly a part of First State Stewart, the Asia Pacific team of Stewart Ivory & Company Limited.
According to FE Analytics, since inception to 8 December 2022, the FSSA Global Emerging Markets Focus Fund has returned 27.03%, compared with the IA Global Emerging Markets sector, which is up 4.97%.
“While the emerging market asset class may be going through a challenging period at the moment, one of the key attributes in our search for quality companies is sustainable business models that are attractive not only from a one- to two-year perspective, but throughout the entire business cycle,” says Nemmoe.
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