William Blair global equity specialist Romina Graiver said sustained high-level economic growth has enabled many emerging markets companies to generate consistently higher returns on assets and capital.
“We also acknowledge that some areas and macro events have provided a tailwind effect for companies to do better as they benefit from an economy that is growing, rather than contracting, which is where we are seeing that there is a bit of de-coupling,” said Ms Graiver.
Ms Graiver said William Blair uses bottom-up fundamental analysis in emerging markets to find quality growth companies with strong governance.
The investment manager likes emerging market countries where it sees opportunities for reform, she said, rather than countries where the macro trends are a headwind for companies.
“We like India and Indonesia for instance,” said Ms Graiver. “In India, we increased our exposure well before the elections. India is a market where we often find very high quality companies with very strong management, like IT services and pharmaceuticals.”
Earlier in the year, William Blair increased its exposure to more cyclical names, which are expected to benefit from an improvement in the domestic economy, she said.
“We also like auto-related companies in India, some of which are benefiting from car demand recovery and improved sentiment,” said Ms Graiver, who believes the Modi pro-growth government will provide a better framework for these quality companies.
William Blair has also increased its exposure slightly to Indonesia, she said, as the likelihood for reform is greater under the new government.
“William Blair has also increased to an overweight position in Mexico due to the clear intention for structural change and also the benefits of proximity to the United States as a trading partner,” Ms Graiver said.
While Brazil is struggling with slow growth, high inflation and a current account deficit, there are some very attractive companies with strong operating performance and growth prospects, she said.
“Despite the weak macro environment, some companies are benefiting from secular growth drivers, such as evolving consumption patterns driven by social demographic changes; others are supported by government policies like in the education space” Ms Graiver said.
William Blair is underweight China, however, since the company sees a long-term deceleration of economic activity, she added.
