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.
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. 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, Rachit, who is based in India and provides invaluable local insight. We work closely with an ESG and engagement specialist team, which gives us significant depth and breadth.
Tim has an accounting background, while I come from a more quantitative background in mathematics, probability and statistics. Rachit is also a chartered accountant. Together, that combination of skills helps us assess opportunities from multiple angles and 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 investment approach?
Tim: We believe emerging markets offer significant opportunities because valuation mispricings occur much more frequently than they do in developed markets. Our aim is to make emerging market volatility work in our favour.
Rather than simply identifying quality companies that appear statistically cheap, we focus on finding attractive entry points where quality businesses are being mispriced by the market.
Alongside stock selection, we have developed a proprietary top-down framework known as the VMR model, which stands for Value, Momentum and Risk. The aim is to gain exposure to the right countries and currencies at the right time.
Around 40% of our alpha opportunities are typically identified through this top-down process, with the remainder coming from bottom-up stock selection.
Generating investment ideas
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 stocks against their own historical trading patterns. These models help shape discussions around potential additions to and removals from the portfolio.
We then hold active monthly discussions that combine our top-down and bottom-up analysis. The team member covering a specific company presents the investment case, and together we decide whether the model recommendations should be implemented.
We then decide which companies to meet and effectively go out and kick the tyres, checking that they remain the same businesses they were when we last assessed the models.
We typically conduct between 200 and 250 meetings with company management teams each year, with around 70% taking place in the countries where the businesses are domiciled. We visit companies, engage with their management teams and, where appropriate, act as stewards of our investors’ capital.
Our proprietary research templates are updated ahead of those meetings, and the strongest convictions that emerge from the process are reflected in additions to or removals from the portfolio.
On the top-down side, we assess which countries and currencies should be overweight or underweight relative to the benchmark. These meetings take place monthly or whenever market events require them.
Our VMR models and sovereign ESG scorecard are updated ahead of those discussions. The scorecard includes three valuation models, seven momentum models and four risk models.
On occasion, the results can be surprising. For example, in April 2026, South Korea moved higher in our rankings despite already delivering exceptionally strong performance. That was largely driven by an unusually rapid pace of earnings upgrades.
Portfolio construction and risk management
Victoria: 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 fundamental in this asset class. Our objective is to ensure that when we are wrong, the impact is manageable rather than commercially damaging.
Our proprietary systems monitor portfolio exposures and profit-and-loss movements daily. We are benchmark-aware and only take active risk where it reflects a genuine conviction. Those convictions can change as circumstances evolve, but they are always expressed within strict guardrails.
With very few exceptions, deviations from the benchmark are kept below 5% at country and currency level, and within plus or minus 2% at individual stock level.
The portfolio typically contains between 100 and 120 holdings. We aim to keep tracking error below 6% and active share above 75%.
The inclusion of top-down analysis also helps create a more diversified and liquid portfolio by spreading exposure across a broader range of holdings.
What differentiates the strategy
Victoria: If you had to distil it down, what sets this strategy apart?
Joaquim: The strategy is built specifically to navigate a diverse and rapidly evolving opportunity set where valuation mispricings can be common.
As a team, we have invested through numerous emerging market crises and bull markets, with 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 maintain a strong governance bias, which we believe differentiates us significantly from many mainstream strategies.
We believe this creates a diversified source of alpha. The correlation of excess returns to our main competitors is typically below 0.2.
We also place a strong emphasis on ESG. 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, typically including countries such as Vietnam, Argentina and Romania.
The investment case for emerging markets
Victoria: Why should this strategy be on investors’ radar? What role can it play within a portfolio?
Tim: In our view, the reality of emerging markets is very different from the perception many investors still hold.
Historically, investors associated emerging markets with oil producers, refiners, mining companies, telecommunications businesses, utilities, agriculture, cement and state-owned enterprises.
Today, close to 85% of earnings come from high-quality, high-value-added and repeatable business models. These include semiconductors, robotics, automation, IT services, e-commerce, electric vehicles, energy-transition materials such as lithium, platinum, copper and rare earths, healthcare diagnostics, medical tourism, renewable energy, biofuels, mobile banking, interactive media, gaming, cloud computing, cybersecurity and smart-city infrastructure.
Many of these businesses compete directly with developed-market companies and operate at the forefront of innovation.
In addition, most of the 10 largest 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 considerable long-term potential ahead.
Victoria: Thank you both for joining me.
