Investing in the
Next Generation of
Emerging Markets

Poor access to credit continues to be a major growth inhibitor for many developing markets. We explore how platform businesses are attempting to bridge the funding gap through the digitalisation of financial services. We present kaspi.kz an illustration of a platform centred on consumer credit, that is driving both societal change and attractive returns for shareholders.

In this paper, we examine the rising trend of Saudi nationals leading Saudi-listed companies. Our work shows that developing an understanding of the people and culture of Saudi companies provides valuable insights on the quality of those companies.

Relatively speaking, the strategy’s returns for the quarter are respectable. While a single quarter of outperformance versus global and emerging market equities is by no means significant, there are observations that we deem significant in shaping the medium-term outlook for the strategy.

The weak absolute returns in the period reflect a very challenging investment environment for our strategy. Our focus on African and Asian companies and through-the-cycle underwriting process puts us at a cyclical disadvantage when food and oil prices experience sharp and sustained inflation.

The strategy experienced a perfect storm of negative risk events during the quarter, starting with the unrest in Kazakhstan in January. This was followed closely by the Russian invasion of Ukraine at the end of February.

The strategy generated a net return of 8.4% in the year ending December 2021. The strategy’s performance in the year was shaped by a continuation of some of the themes that underpinned returns in 2020 and others which had a less favourable impact on historical returns but now appear to be turning the corner.

The strategy’s performance in the quarter was driven by three key factors: 1. Reopening sensitivity in the retail and financial services portfolio in Indonesia and the Philippines as those economies emerge from their respective lockdowns as a result of a ramp up in vaccinations in the key economic centers.

The strategy continues to be rewarded for the thesis we’ve built around technology, payments, and financial inclusion in our markets. The starting point for us in that process was the mobile money opportunity in East Africa which continues to be best exemplified by Kenya’s Safaricom’s M-Pesa.

In this month’s edition of Insights, we discuss how traditional herbal remedies are moving to the mainstream and highlight Sido Muncul, the Indonesian consumer company at the forefront of this rising trend

Our Insights on M-Pesa, the Kenyan company at the forefront of one the most exciting digital financial revolutions in the world today.

The Vergent Emerging Opportunities strategy generated net USD returns of negative 3.6% in the quarter ending March 31 2021. The strategy continues to be focused on identifying transformational growth companies in the Frontier and smaller Emerging markets.