Emerging Markets Equity
Background:
The Global Emerging Markets Equity Programme commenced in October 2009. It is a long only strategy that offers equity exposure to companies in developing and frontier markets. The lead portfolio manager for global emerging markets equity is Edward Baker. Prior to joining The Cambridge Strategy in 2007, Ed was CIO of emerging markets equities at AllianceBernstein where he had responsibility for the $10 billion EM equity product and supervised a team of 21 analysts. The investment team is organized regionally with an experienced portfolio manager responsible for each of Asia, EMEA and LATAM.
Investment Approach:
The Global Emerging Markets Equities Programme combines both top down and bottom up components. We believe that at any point in time there is an identifiable set of factors that drive earnings, valuations and stock prices in the short to medium term. These factors can be macroeconomic, cyclical or structural and can be global, regional or country specific. Identifying these key drivers and market expectations for them is the first step in our investment process.
Our stock selection then identifies those stocks that offer attractive risk/reward characteristics relative to these key drivers. This will sometimes lead us to pursue contrarian opportunities but in other cases stocks with high earnings potential will be attractive. As a result our investment approach has both ‘growth’ and ‘value’ elements and leads us to a ‘style’ neutral portfolio. We believe that corporate governance is a significant element of any stock’s risk/reward profile and our research addresses the subjective issues that link corporate governance to valuations.
Regional and country allocations are actively managed reflecting three elements: top down assessments, bottom-up opportunities and risk controls. Country risk remains the largest element of portfolio risk in emerging markets and effective risk control requires careful attention to country weights. Currency exposures are a related source of portfolio risk and reward and are explicitly managed. Although our bias is to be long emerging market currencies, there are times when the signals from our proprietary currency models motivate us to hedge our exposures.
Portfolio tracking error is carefully monitored and kept below 8%. We feel that exposure limits are the most effective risk control tool available and limits are set at the region, country, sector and individual stock levels. Liquidity is carefully monitored and we avoid holdings that cannot be liquidated over a reasonable time frame.
We invest in non-benchmark stocks, including holdings in frontier markets. These will generally be smaller holdings and they will only be maintained when we believe they offer exceptional upside potential. The portfolio is limited to a total of 20% in the frontier markets.
| Description: | Style Agnostic – Emerging Markets Equities – Global |
| Investment Style: | Long Only - Active Equities - Fundamental/Active Currency |
| Target Returns: | MSCI Emerging Markets Index plus 3%-5% per annum (rolling 3 year periods) |
| Benchmark: | MSCI Emerging Markets Index |
| Target Information Ratio | 0.8 (over rolling 3 year periods) |
| Target Tracking Error: | 4% - 8% per annum |
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| Investment Universe: | |
| Selection Universe: | Broad market(subject to liquidity limits) |
| Regions: | LATAM/ Asia /EMEA |
| Markets: | MSCI Emerging Markets Index plus frontier emerging markets |
| Instruments: | Equity instruments/Derivatives (inc. FX)/ETF/Indices or basket exposure |
| Structural Details: | |
| Vehicles: | Pooled Fund/Managed Account |
| Liquidity: | Monthly |
| Minimum Investment: | Pooled Fund US$ 250,000/Managed Account $10,000,000 (or equivalent) |
| Investment Manager: | The Cambridge Strategy (Asset Management) Limited |
| Management Fee: | Up to US$ 50 million: 1.0%p.a |
| US$ 50 - US$ 100 million: 0.90%p.a | |
| US$ 100 - US$ 200 million: 0.80%p.a | |
| Over US$ 200 million: 0.75%p.a |
Awards
The Cambridge Strategy Apollo Emerging Macro Programme
The Cambridge Strategy Asian Markets Alpha Programme
The Cambridge Strategy Emerging Markets Alpha Programme
The Cambridge Strategy Asian Markets Alpha Programme
