As the emerging markets asset class has evolved, screening for quality is more important than ever, as the focus has shifted from short-term growth to seeking exposure to companies across all sorts of markets that are embedded for growth over the long term.
Many investors are now getting emerging markets exposure through passive strategies, which are apt at capturing growth during periods of market stability and economic expansion. However, active strategies are poised to outperform during volatile or down markets, as managers can navigate opportunities and search out new companies or markets that are outside of the purview of indexes to maintain a quality portfolio, according to Matthews Asia.
Actively managing emerging markets exposure and screening for quality means a hard examination of companies and their suppliers and engaging with the management of businesses, according to Matthews Asia. Down the road, investors may find these long-term quality plays become the new sought-after companies, industries, and geographies of emerging markets.
MEM invests in emerging market companies with perceived sustainable growth potential, capitalizing on consumption and innovation trends. The fund utilizes an all-cap, company-first approach, which emphasizes fundamental research over top-down country or sector allocation.
For focused exposure to China and innovation in China, the Matthews China Active ETF (MCH) and the Matthews Asia Innovators Active ETF (MINV) are strong offerings to consider. Like MEM, MCH, and MINV both screen for quality.
MINV, a high-conviction, concentrated equity portfolio, invests in innovative companies in Asia ex-Japan, capitalizing on the new economy and rising disposable income in the region. MINV is worth consideration for investors who want a more thematic and concentrated approach.
MCH is a high-conviction equity portfolio that seeks companies benefiting from China’s domestic consumption. MCH uses an all-cap fundamental GARP approach driven by proprietary research and combines long-term core holdings with more opportunistic ideas to provide consistency through cycles.
For more news, information, and analysis, visit the Emerging Markets Channel.