FEM Q4 2021 Manager Letter

January 24, 2022

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. In the former, portfolio companies that offer digital services (payments and software), healthcare, and consumer staples have been big winners in the pandemic with many likely to experience a step change in their long-term cash flow generation capacity. With digital services companies, we’ve maintained our focus on profitable companies that are delivering valuable solutions to their consumer and business clients through the deployment of technology that is scaleable and adapted to local market dynamics. In health and consumer staples, we gained more confidence in companies we owned prior to the pandemic as management excellence, market leadership, distribution prowess, and brand equity all played nicely into consumer habit changes that were brought about by the pandemic.

In the latter, the late reopening of economies in many Asian and African markets we invest in has meant that earnings have remained below potential for longer (compared to similar companies in more developed countries). As a result, those companies trade at deeply discounted valuations, presenting an opportunity to own them as they recover back to pre-pandemic levels of earnings. Naturally, those are businesses that sell products and services in an offline environment and typically require a high degree of mobility (alcoholic beverages, education, retail, and snacking are good examples). Management teams at these companies did not rest on their laurels and have adapted their businesses to be more agile, more digital and more available to their customers. We expect these initiatives to be generously rewarded as economies begin to reopen.

This mix of businesses complements the geographically diverse nature of our concentrated portfolio and mitigates the impact that a change in the market environment can have on returns. For example, as we enter a higher interest rate environment globally, valuations of our digital services companies might be capped but we expect that to be compensated by higher margins (i.e.: earnings growth) from our financial services companies. The portfolio’s investment in a wide range of market capitalisations and exposure to different ownership structures (owner-operator or multinational) adds to factor diversification and sensitivity to the ebbs and flows of liquidity. Within the portfolio, our job then is to ensure that capital is allocated to probabilistically optimise these factors, with the objective of producing a net positive outcome that is consistent with our and our investors’ return expectations. A less observable benefit of this approach is it allows us to see through periods of volatility which extends our holding period advantage in the market.

Outside the portfolio, our research is focused on identifying companies that can provide a superior risk-reward profile to existing investments or the excess cash position we might be holding at any one time. Our team’s knowledge of the markets and companies we invest in continues to compound and the opportunity set is getting deeper and more interesting for public market investors.

This year’s performance divergence between the strategy and emerging markets (a positive swing of ~13% versus the MSCI EM which was down ~5% in 2021) adds credence to the argument us and others have been making about looking beyond index-driven emerging market classifications when allocating capital outside core developed markets. We’ve put our money behind this thesis with a signification proportion of our Managing Partners’ capital invested in the strategy. We believe that a concentrated, geographically diverse, and benchmark agnostic approach is appropriate for investors looking to capture the growth in the next generation of emerging markets (i.e.: beyond the now “emerged” markets of China, Korea and Taiwan).

As the strategy wraps up its third year, we want to thank our clients, partners, and colleagues for their support and wish all a prosperous 2022.

Vergent Asset Management LLP


  1. Unless otherwise stated, all data is at December 30, 2021 and stated in US dollars (US$). Source: Connor, Clark & Lunn Financial Group, Thomson Reuters Datastream.
  2. Performance history for the Vergent Emerging Opportunities Strategy is that of the Vergent Emerging Opportunities Composite. The Composite has an inception and creation date of August 2018.
  3. Net performance figures are stated after management fees, estimated performance fees, trading expenses and before operating expenses. Operating expenses include items such as custodial fees for pooled vehicles and would also include charges for valuation, audit, tax and legal expenses. Such additional operating expenses would reduce the actual returns experienced by investors. Past performance of the strategy is no guarantee of future performance; Future returns are not guaranteed and a loss of capital may occur. For illustrative purposes, performance fee of 20% on added value over the hurdle rate of 6% plus the management fee of 1.25% have been assumed. Actual management fees charged to a particular account may vary.
  4. There is no benchmark for the Vergent Emerging Opportunities Strategy because it has an absolute return objective
  5. Standard Deviation measures the dispersion of monthly returns since the inception of the strategy.

Benchmarks and financial indices are shown for illustrative purposes only, are not available for direct investment, are unmanaged, assume reinvestment of income, do not reflect the impact of any management or incentive fees and have limitations when used for comparison or other purposes because they may have different volatility or other material characteristics (such as number and types of instruments) than the Strategy. The Strategy’s investments are not restricted to the instruments comprising any one index and do not in all cases correspond to the investments reflected in such indices.

These materials (“Presentation”) are furnished by Vergent Asset Management (“Vergent”) on a confidential basis for informational and illustration purposes only. This Presentation is intended for the use of the recipient only and may not be reproduced or distributed to any other person, in whole or in part, without the prior written consent of Vergent. Certain information contained in this Presentation is based on information obtained from third-party sources that Vergent considers to be reliable. However, Vergent makes no representation as to, and accepts no responsibility for, the accuracy, fairness or completeness of the information contained herein. The information is as of the date indicated and reflects present intention only. This information may be subject to change at any time, and Vergent is under no obligation to provide you with any updates or amendments to this Presentation. This Presentation is not an offer to buy or sell, nor a solicitation of an offer to buy or sell any security or other financial instrument advised by Vergent. This Presentation does not contain certain material information about the strategy, including important risk disclosures. An investment in the strategy is not suitable for all investors, and before making an investment in the strategy, you should consult with your professional advisor(s) to determine whether an investment in the strategy is suitable for you in light of your investment objectives and financial situation. Vergent does not purport to be an advisor as to legal, taxation, accounting, financial or regulatory matters in any jurisdiction, and the recipient should independently evaluate and judge the matters referred to in this Presentation. Vergent Asset Management LLP is registered in England and Wales with its registered office address at 8th Floor, 1 Knightsbridge Green, London SW1X 7QA, United Kingdom (Companies House number OC418829) and is authorized and is an Exempt Reporting Adviser in the USA. It is regulated by the Financial Conduct Authority (FRN: 791909).


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Vergent Asset Management LLP
January 24th, 2022