Page 27 - DIY Investor Magazine | Issue 34

‘WE HAVE FOUND MANY CONSUMER BUSINESSES TO BE EXCITED ABOUT ACROSS THE EMERGING MARKETS’
In the near-term, however, with energy prices spiking to recent highs, shares of energy companies have also risen sharply, which has been headwind to the portfolio’s performance.
LONG-TERM POSITIONING: FINANCIALS, CONSUMER PRODUCTS AND INFORMATION TECHNOLOGY
Our focus on strong, sustainable business models has resulted in structural overweights across three broad categories: financials, the consumer and information technology (IT), each accounting for about 25% of the portfolio.
Across the financials sector we see many fast-growing, nimble private sector companies competing against SOEs
in the sector, which have low levels of credit and insurance penetration. And while our positioning is based on companies with strong long-term prospects, the Trust is benefitting from a macro tailwind – rising interest rates are positive for most financial services businesses.
We have found many consumer businesses to be excited about across the emerging markets. Our positions tend to be in iconic, local brands across consumer staples, food producers and pharmacy retailers, as well as e-commerce companies with long runway for growth.
Our positioning across the IT sector ranges from semiconductor manufacturers and data centres to asset-light IT service providers that provide software development for big multinational companies.
The remaining 25% of the portfolio spans the health care, media and communications sectors, where innovation and asset-light business models are creating new companies serving a rapidly growing consumer base across the emerging markets.
SUSTAINABLE GROWTH INCORPORATES ESG CONSIDERATIONS
Environmental, social and governance (ESG) has always been a clear input into the Trust’s focus on finding companies with sustainable growth. ESG factors are considered in the initial phase of research through the team’s checklist of 40 questions related to ESG issues and a materiality framework.
Equally important to the process is the team’s presence
in the markets they cover – close to 40 sector analysts are based across eight locations. At times, this local presence has provided unique insight needed to make an investment decision.
One example is our investment in the largest condiment producer in China.
The company had a relatively low rating from an external provider, based on the view that the company lacked a sufficient strategy and guidelines for its sourcing of soy beans.
However, our Mandarin-speaking analysts based across Asia had a different view, having spoken at length with the company and learned that the products are extensively tested for quality and do not use genetically modified organisms (GMOs).
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DIY Investor Magazine · July 2022