Beyond China and India: Investing in the Next Generation of Emerging and Frontier Markets

Emerging Market (EM) investing has historically been dictated by EM indices, yet these EM indices are increasingly broken and obsolete by virtue of their narrow country concentration and outdated portfolio construction. These indices overlook the last sizeable untapped EM growth opportunities such as the Asian Growth Cubs – 5 large, fast-growing, and digitally-enabled countries in South Asia.

In the upcoming webcast, Beyond China and India: Investing in the Next Generation of Emerging and Frontier Markets, Maurits Pot, Founder & CIO, Dawn Global Management, will explore why these Asian Growth Cubs serve as an essential diversification to all EM allocations and how the Cubs are now for the first time directly accessible to US investors through an innovative and pioneering strategy launched by Dawn Global last month.

Specifically, the recently launched Asian Growth Cubs ETF (CUBS) is the first active thematic ETF to focus on public equities in emerging and frontier growth markets.

CUBS offers investors actively managed exposure to five large, fast-growing markets – Bangladesh, Indonesia, Pakistan, Philippines, and Vietnam. These five economies have individually grown GDP faster than 6% a year in USD since 2000. In addition, Bangladesh and Vietnam have compounded GDP for 40 consecutive years, including 2020. Yet, these markets remain inaccessible to most foreign investors due to little or no ETF coverage or American Deposit Receipt listings.

“The IMF expects Emerging Asia to be the fastest-growing region in the world between 2020-26, driven by young, educated, digitally enabled, and growing middle-class populations,” according to Dawn Capital.

Dawn Global believes active investment management is required to identify the most compelling growth companies in these less covered markets and mitigate company and governance risk. The investment process involves top-down company screening and bottom-up company analysis to identify the most compelling investment opportunities. The ETF’s high-conviction portfolio is reviewed quarterly and re-balanced twice a year through equal weighting across all securities to mitigate single country and single company risk. The portfolio is geared towards tomorrow’s economy, with a bias towards Healthcare, Telecom Media Technology, Consumer Goods, and Financials.

Additionally, the fund provider takes an environmental, social, and governance investment approach when selecting component holdings.

“Actively managed investment process combines quantitative top-down company screening with an ESG filter, followed by qualitative bottom-up company analysis and a portfolio framework including equal-weighting at each semi-annual rebalancing. The environmental, social, and corporate governance (ESG) filter results in the exclusion of companies involved in defense, fossil fuels, gambling, mining, and tobacco,” according to Dawn Capital.

Financial advisors interested in learning more about next-generation emerging Asian opportunities can register for the Tuesday, July 13 webcast here.