We embrace being specialists in under-researched markets where our
deep-dive fundamental research process creates a true investing edge.
We are passionate about Frontier and Emerging Markets because of the
immense growth opportunities they offer and the diversity of their people,
markets, and cultures.
Our management committee is comprised of experienced investment and business professionals that help the firm deliver on its objectives towards our clients, staff, shareholders, and the wider community.
As this quarter marks the final letter for the year 2022, we thought it will be helpful to reflect on the key events that shaped the performance of the strategy in the year.
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.
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.