Artemis SmartGARP Global Emerging Markets Equity Fund update

Raheel Altaf and Peter Saacke, managers of the Artemis SmartGARP Global Emerging Markets Equity Fund, report on the fund over the quarter to 31 March 2024.

Raheel Altaf

Source for all information: Artemis as at 31 March 2024, unless otherwise stated. 

The fund’s objective is to grow capital over a five-year period. The fund returned 6.6%, ahead of its benchmark the MSCI Emerging Markets NR GBP index1, which returned 3.3%. It was also ahead of its second benchmark, the IA’s Global Emerging Markets NR2 sector, where the average return was 3.2%.  

For full five-year annualised performance, please see below. Please remember that past performance is not a guide to the future.

Emerging market shares rose during the quarter, although not as much as developed market shares. Optimism about the prospect of lower interest rates and encouraging economic data from around the world supported stockmarkets. With a recession looking less likely, particularly in the US, investors are more willing to take risks.

Technology and ‘cyclical’ (economically-sensitive) areas of the market led, as traditional ‘defensives’ (less economically sensitive companies) such as healthcare and makers of consumer staples (essential products) lagged.

'Value' stocks (those that trade on below-average valuations) were not able to keep pace with the market, although they did rise over the quarter. The fund outperformed, despite our significant bias towards value stocks. Improved investor sentiment is supportive for emerging market shares.

Favourable tailwinds for our holdings

A diverse group of companies contributed to performance in the quarter, reflecting several positive tailwinds developing across our holdings.

Top contributors in the first quarter were Indus Towers (telecoms), CNOOC (energy), JB Financial and PKO (banks), and Lao Feng Xiang (jewellery). Artificial intelligence (AI) themed stocks in Taiwan also performed well, and our holdings in Wiwynn and Ennoconn featured among the top contributors.

On the negative side, China Medical System shares fell following weaker guidance around revenues and earnings. Elsewhere, softer commodity prices held back our positions in that area, with Kumba Iron and Gerdau seeing falling share prices.

Despite the setbacks, the fund delivered strong outperformance in the quarter.

Additions – improving trends

  • Semiconductors and electronic components – Hynix, Hon Hai and TSMC
  • Cyclicals – Star Bulk Carriers, Evergreen Marine and Weichai Power

Reductions – deteriorating fundamentals

  • Tech – Novatek, Lenovo, Foxconn
  • Banks – Tisco and Absa Group
  • Weak Q4 results – Gerdau, Ping An and Hello Group

Following these changes, the fund still has large positions in China, Brazil and Korea and smaller positions in India, Taiwan and Saudi Arabia. In terms of sectors, the fund has a bias towards financials, consumer discretionary (non-essentials) and industrials. The fund holds fewer shares in materials, technology and consumer staples.

We remain positioned for a rotation into value stocks

The fund continues to offer an attractive combination of extremely low valuations and attractive growth prospects.

We think our discipline around valuations is likely to be a rewarding strategy as we progress through 2024 and for the years ahead.

For several years, surging share prices reduced investors’ focus on the details (‘fundamentals’) of individual companies. This created excessively high valuations in certain parts of the market. That process has gone into reverse and we think it has further to run. We see less risk in companies that trade on low valuations and so prefer to focus on this part of the market.

1MSCI EM (Emerging Markets) NR: A widely-used indicator of the performance of emerging markets stockmarkets, in which the fund invests. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark. 
2IA Global Emerging Markets NR: A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark. 

 

Annualised performance 12 months to 31 March  2024 2023 2022 2021 2020
Artemis SmartGARP Global Emerging Markets Equity Fund 16.9% 0.6% 1.8% 41.3% -17.1%
MSCI EM (Emerging Markets) NR GBP 5.9% -4.9% -7.1% 42.3% -13.5%
IA Global Emerging Markets NR 6.4% -4.3% -7.1% 47.6% -14.6%
*Past performance is not a guide to the future. Source: Artemis/ Lipper Limited, class I accumulation GBP units to 31 March 2024. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. This class may have charges or a hedging approach different from those in the IA sector benchmark.

Raheel Altaf

Manages:

‘Global emerging markets equity‘, 'Global equity' strategies

Raheel joined Artemis in 2014 and has managed Artemis‘ ‘global emerging markets equity‘ and ‘global equity’ strategies since launch in April 2015 and since April 2022, respectively.

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