Monetizing Innovation in Emerging Markets

Innovation is commonly associated with breakthrough developments in technology or biotech.

Yet we broaden that concept from an investment perspective to include any product, brand, business model or strategic differentiation that allows for growth in the market share of an existing market—or in the development of an entirely new market, which we define as transformational growth.

Our Investment Philosophy

Within the emerging world, we see innovation in many sectors, but we observe its greatest concentration in high-growth, high-profit industries—including Consumer Discretionary, Health Care and Technology. These industries are a relatively recent phenomenon creating opportunities that hadn’t been available to emerging market investors historically.

The way we invest is to focus on the types of innovative companies in these industries, rather than focusing on stereotypical emerging market businesses, such as ones that involve commodities or cheap labor.

Our investment philosophy is one that seeks to generate attractive risk-adjusted returns for investors by focusing on innovation in the small- and mid-cap space. We also believe that we can achieve our objectives without exploitation, finding investments that are at the cross section of high earnings growth and benefiting the local population.

Our Investment Process

We have a universe of roughly 5,000 companies to choose from. Using a screening process, we weed out the less desirable companies—and focus on those we believe carry the highest potential for attractive rewards.

There are plenty of companies we avoid because we do not favor the industries in which they operate. For example, we do not invest in any commodities businesses (such as energy, metals or mining), or companies in highly regulated industries (such as telecom or utilities) in which innovation is low or non-existent. Rather, we focus on industries characterized by high levels of innovation.