Video transcript
Speakers
- Victoria Bartlett – Senior Investment PR Manager, Rathbones
- Tim Love – Fund Manager, Rathbone SICAV Global Emerging Markets Equity Fund, Rathbones Asset Management
- Joaquim Nogueira – Fund Manager, Rathbone SICAV Global Emerging Markets Equity Fund, Rathbones Asset Management
Transcript
Introduction
Victoria: Hello and welcome. I’m Victoria Bartlett, Senior Investment PR Manager here at Rathbones. I’m delighted to be joined today by Tim Love and Joaquim Nogueira, Fund Managers of the Rathbone SICAV Global Emerging Markets Equity Fund at Rathbones Asset Management. Tim and Joaquim, thank you for joining me.
Tim and Joaquim: Thank you for having us.
The fund and investment team
Victoria: You’ve been working together for nearly 30 years, which is quite a feat. Can you tell me about yourselves, the fund and what it sets out to achieve?
Joaquim: The fund invests in emerging market equities and aims to deliver long-term capital growth, with the objective of outperforming the MSCI Emerging Markets Total Return Index over the long term.
As you mentioned, Tim and I have worked together for more than 30 years and, over that time, we’ve built a very consistent and disciplined investment approach.
We are also joined by our Senior Fund Analyst, Rajit, who is based in India and has spent most of his career there, giving us invaluable boots-on-the-ground insight. We also work closely with an ESG and engagement specialist team, which gives us a depth and breadth of resource that would otherwise be difficult to achieve.
We bring a complementary set of skills. Tim has an accounting background, while I come from a quantitative background in mathematics, probability and statistics. Rajit is also a chartered accountant. Together, that blend of expertise helps us assess opportunities from multiple angles, which is central to how we run the strategy.
Investment philosophy
Victoria: When it comes to your investment philosophy, how would you describe the core beliefs that guide your approach?
Tim: We believe that emerging markets offer significant opportunities because valuation mispricings occur much more frequently than they do in developed markets.
By their nature, emerging markets are constantly evolving and there are around 30 markets within the opportunity set. Our aim is to make that volatility work in our favour.
Rather than simply identifying quality companies that appear statistically cheap at any given moment, we also focus on finding the best entry points. This increases the likelihood of buying high-quality companies when they are attractively valued.
Alongside our stock-selection process, we have developed a proprietary top-down framework called the VMR model, which stands for Value, Momentum and Risk. The aim is to identify the right countries and currencies to be exposed to at the right time.
Typically, around 40% of our opportunities are identified through top-down analysis, with the remainder generated through bottom-up stock selection.
Generating ideas and building the portfolio
Victoria: Thinking about the day-to-day process, can you talk us through how ideas are generated and how they become part of the portfolio?
Joaquim: We regularly refresh our bottom-up screening tools, including our One-to-Five framework, which identifies valuation mispricings by comparing companies against their own history.
Those models help shape discussions within the team, highlighting potential additions and removals from the portfolio.
We then have active monthly discussions that combine top-down analysis with bottom-up insights. The team member responsible for a particular company presents the investment case and debates whether any action should be taken based on the model recommendations.
Following that, we decide which companies to meet. We effectively go out and kick the tyres to ensure the businesses remain consistent with our expectations and the assumptions in our models.
We typically conduct between 200 and 250 management meetings each year, with around 70% taking place in the companies’ home markets. We proactively engage with management teams and update our proprietary research templates ahead of each meeting.
The strongest convictions that emerge from this process are reflected in additions to or removals from the portfolio.
On the top-down side, we focus on determining which countries and currencies should be overweight or underweight relative to the benchmark. The VMR models are updated ahead of those discussions, as is our sovereign ESG scorecard.
The scorecard consists of three valuation models, seven momentum models and four risk models.
Sometimes the outcomes can be surprising. For example, in April 2026, Korea moved higher in the scorecard despite already being up around 100% year-to-date. It was one of the most unusual events we have seen in three decades and was driven by an exceptionally rapid pace of earnings upgrades.
Portfolio construction and risk management
Victoria: Turning to the ongoing management of the fund, how do you stay on top of risk across the portfolio and what does that monitoring process look like?
Tim: Portfolio construction and risk management are absolutely critical in this asset class.
You want to ensure that when you are wrong, you are hurt, but not commercially challenged.
Our proprietary systems monitor all portfolio exposures and profit-and-loss movements daily. We are benchmark-aware, and active risk is only added where it reflects a genuine conviction. Those convictions can change as events evolve, but they are always expressed within predefined guardrails.
Guardrails are very important. With very few exceptions, deviations from the benchmark are generally kept below 5% at the country level and within plus or minus 2% at the individual stock level.
The portfolio is highly diversified, typically containing between 100 and 120 holdings. We aim to keep tracking error below 6% and active share above 75%.
I would also highlight that our approach tends to create a more liquid portfolio with greater capacity. The inclusion of top-down analysis spreads risk across a larger number of more liquid positions.
What differentiates the strategy
Victoria: If you had to distil it down, what is the edge? What sets this strategy apart?
Joaquim: The strategy is based on a custom-built investment approach designed specifically for a diverse and rapidly changing opportunity set, where valuation mispricings can be frequent and meaningful.
As a team, we have invested through multiple emerging market crises and bull markets. We also have experience managing both long-only and long-short portfolios.
Our combination of proprietary top-down and bottom-up analysis provides valuable cross-asset insights, helping us refine convictions and identify broader market and macroeconomic signals.
We are also style-agnostic and have a strong governance bias, which differentiates us from many mainstream strategies.
We believe this creates a diversified source of alpha. The correlation of excess returns to many of our major competitors is very low, typically below 0.2.
We also place significant emphasis on ESG considerations. The fund is classified as SFDR Article 8 and has less than 5% non-alignment with each of the UN Sustainable Development Goals.
We target at least one-third lower carbon intensity than the MSCI Emerging Markets Index and can allocate up to 10% of the portfolio to frontier emerging markets, which are typically countries such as Vietnam, Argentina and Romania.
The case for emerging markets
Victoria: Let’s bring it all together. Why should this strategy be on an investor’s radar? What problem does it solve within a portfolio?
Tim: In our view, emerging market fundamentals are increasingly leading perceptions, and the reality is very different from many investors’ assumptions.
The old perception of emerging markets was built around sectors such as oil, mining, telecommunications, utilities, agriculture, cement and state-owned enterprises.
Today, the reality is very different.
Close to 85% of earnings now come from high-quality, high-value-added and highly repeatable businesses. These include semiconductors, robotics, automation, IT services, e-commerce, electric vehicles, energy-transition materials such as lithium and copper, healthcare diagnostics, medical tourism, renewable energy, biofuels, mobile banking, interactive media, gaming, cloud computing, cybersecurity and smart-city infrastructure.
These businesses compete directly with developed-market companies and increasingly lead innovation in many areas.
In addition, most of the top 10 emerging markets are now investment-grade and the gap between emerging and developed market credit ratings continues to narrow.
Ultimately, we believe emerging markets remain under-owned, under-loved and under-invested, with significant opportunities still ahead.
Closing remarks
Victoria: Thank you both for joining me.
Tim and Joaquim: Thank you.
