Emerging Markets Equity Fund Investing for Long-Term Success

Emerging markets equity fund investing can be a great way to diversify your portfolio and tap into the growth potential of developing economies.

Emerging markets have historically outperformed developed markets over the long term, with the MSCI Emerging Markets Index returning an average of 10% per year since 2000.

However, emerging markets can be riskier than developed markets due to factors such as currency fluctuations and political instability.

To mitigate these risks, it's essential to do your research and choose a reputable emerging markets equity fund with a strong track record.

Performance is a crucial aspect of an emerging markets equity fund. The performance data quoted above represent past performance and do not guarantee future results. Current performance of the Fund may be lower or higher than the performance quoted.

One of the key performance metrics is the average annual total return, which can be found in the performance data. For example, the Matthews Emerging Markets Equity Fund - MEGMX had a 3-year average annual total return of -0.04%.

The Fund's performance can also be compared to a benchmark, such as the MSCI Emerging Markets Index. The Matthews Emerging Markets Equity Fund - MEGMX had a 3-year average annual total return of -0.04%, while the MSCI Emerging Markets Index had a 3-year average annual total return of -0.82%.

Here is a comparison of the Matthews Emerging Markets Equity Fund - MEGMX and the MSCI Emerging Markets Index for the 2023 calendar year:

The Fund's performance can also be measured by its risk metrics, such as alpha, beta, and Sharpe ratio. The Fund's alpha is -0.52%, indicating that it has underperformed the benchmark. The Fund's beta is 0.96, indicating that it has been less volatile than the benchmark. The Fund's Sharpe ratio is -0.19, indicating that it has provided lower returns per unit of risk taken.

To give you a better idea of the Fund's performance over time, here is a graph showing the growth of a hypothetical $10,000 investment since inception.

The GQG Partners Emerging Markets Equity Fund is designed to deliver long-term capital appreciation. It focuses on investing in high-quality companies with attractive growth prospects in emerging markets.

The fund's investment process is built around evaluating each business based on financial strength, sustainability of earnings growth, and quality of management. This approach aims to manage downside risk while providing attractive returns to long-term investors.

Here are some key fund details:

The fund basics are worth understanding before you invest. The GQG Partners Emerging Markets Equity Fund has a contractual arrangement in place that limits certain fees and/or expenses.

This arrangement has been in effect and has helped keep costs down for investors. Had fees/expenses not been limited, returns would have been lower.

The expense cap is set to expire on February 28, 2025, so it's essential to review the prospectus for details.

Here are the key facts about the fund's basics:

Distributions are a crucial aspect of investing, and it's essential to understand how they work.

The record date for distributions is typically the date when the fund's NAV is determined, which can be found in the distribution history. For example, the record date for the distribution on December 17, 2024, was also December 17, 2024.

The ex-date, pay-date, and reinvest-date are also important dates to note. The ex-date is the date when the fund stops trading at the old NAV, the pay-date is when the distribution is paid, and the reinvest-date is when the distribution is reinvested. For instance, the ex-date, pay-date, and reinvest-date for the distribution on December 17, 2024, were December 17, 2024, December 18, 2024, and December 18, 2024, respectively.

The amount of the distribution can vary significantly from year to year. In 2024, the total distribution per share was $0.12024, while in 2021, it was $1.29976.

Here's a breakdown of the distribution amounts and percentages of NAV for the past few years:

It's essential to note that past performance is no guarantee of future results, and the fund's distribution history may not be indicative of future distributions.

Investing in emerging markets can be a high-risk, high-reward proposition. The Baillie Gifford Emerging Markets Equities Fund is no exception, with risks including Investment Style Risk, Growth Stock Risk, Emerging Markets Risk, Market Disruption and Geopolitical Risk and Government and Regulatory Risk.

The fund's bottom-up approach to investing means that stock selection is likely to be the main driver of investment returns. Returns are unlikely to track the movements of the benchmark, making it a more volatile investment.

Investing in emerging markets can involve additional market, credit, currency, liquidity, legal or political risks than investing in more developed markets.

Risks are an inherent part of investing, and it's essential to understand the potential risks associated with the Baillie Gifford Emerging Markets Equities Fund. Investment Style Risk is a significant concern, as the fund is managed on a bottom-up basis and stock selection is likely to be the main driver of investment returns.

Returns are unlikely to track the movements of the benchmark, making it a volatile investment option. The prices of growth stocks can be based largely on expectations of future earnings and can decline significantly in reaction to negative news.

Investing in emerging markets can involve additional market, credit, currency, liquidity, legal or political risks than investing in more developed markets. This can be particularly concerning in Asia, where some markets have had little regulation, increasing the risk of loss due to fraud or market failures.

Governmental and regulatory authorities in the US and elsewhere have intervened in markets, which can be unpredictable and restrict the fund's ability to implement its investment strategies. The effects of these actions can be uncertain, making it challenging to navigate the market.

The value of investments could be adversely affected by events such as war, public health crises, and changes in economic and political conditions in the US and elsewhere.

Volatility can be a double-edged sword. A potentially volatile start to 2025 may transition to growth and opportunity in emerging markets.

This shift in market dynamics can be attributed to the fact that volatility often precedes growth. Emerging markets have historically shown resilience in the face of uncertainty.

In 2025, investors may find themselves navigating a landscape of increased market fluctuations. However, this volatility can also present a chance to capitalize on emerging opportunities.

The portfolio of our emerging markets equity fund is a diverse and dynamic mix of stocks from around the world.

The fund holds 80 positions, which is significantly lower than the benchmark's 1,277 positions. This suggests that the fund is actively managed and focused on a select group of high-potential stocks.

The fund's weighted average market cap is $163.2 billion, which is slightly higher than the benchmark's $158.8 billion. This indicates that the fund is invested in larger-cap stocks.

Active share is a measure of how different a fund's portfolio is from its benchmark. The fund's active share is 66.8%, which means that it is significantly different from the benchmark.

The fund's P/E ratio using FY1 estimates is 15.1x, which is higher than the benchmark's 13.3x. This suggests that the fund is invested in stocks with higher price-to-earnings ratios.

Here is a breakdown of the fund's sector allocation:

The fund's country allocation is also diverse, with significant exposure to emerging markets such as China/Hong Kong (36.9%), India (19.3%), and Taiwan (10.0%).

The fund's equity market cap exposure is also noteworthy, with 70.7% of its holdings in mega-cap stocks (over $25B), which is significantly higher than the benchmark's 59.1%.

The ratings for our emerging markets equity fund are based on its past performance, but it's essential to remember that past performance is no guarantee of future results. High ratings and rankings do not assure favorable performance.

Our fund has received a 3-star rating from Morningstar, which is out of 711 funds. This rating is based on its historical risk-adjusted total returns. Morningstar also provides ratings for specific time periods, such as 1-year, 3-year, and since inception.

Here are the Morningstar ratings for our fund:

Lipper Analytical Services, Inc. also ranks our fund based on its total return, including reinvestment of dividends and capital gains. The lower the number rank, the better the fund performed compared to other funds in the classification group.

The investment strategy of this emerging markets equity fund is focused on taking advantage of short-term divergences in market price and intrinsic business value. This active approach allows the fund to capitalize on opportunities that may arise from these divergences.

The fund's emphasis is on sustainable franchises with long-term growth prospects trading at attractive valuations. This means that the fund is looking for companies in emerging markets that have a strong potential for growth and are undervalued in the market.

The fund's objective is to achieve long-term capital appreciation by investing at least 80% of its assets in equity securities of companies located in emerging market countries. The fund has been in operation since January 31, 2020, and is available for investment in USD, EUR, and GBP.

An active approach to investing means we're looking to take advantage of short-term divergences in market price and intrinsic business value.

This involves being nimble and adaptable, as market prices can fluctuate rapidly. We aim to capitalize on these fluctuations by making informed investment decisions.

We're not just focused on short-term gains, but also on identifying companies with strong long-term growth prospects trading at attractive valuations. This means we're looking for sustainable franchises that can deliver consistent returns over time.

Companies with a proven track record of growth and profitability are more likely to weather market storms and continue to thrive.

Active share is a measure of how closely a fund's portfolio overlaps with its benchmark. An active share of 100 means the fund has no overlap with the benchmark.

Turnover is calculated as the smaller figure of either purchases or sales for the month, divided by an average fund market value. This gives you an idea of how frequently a fund's holdings change.

Market cap, or market capitalization, is the weighted average size of companies in a fund's portfolio. It's a way to gauge the overall size of the companies a fund owns.

Price-to-book ratio is a measure of valuation levels, calculated as the weighted average ratio of current share price to last reported company book value per share.

The price-to-earnings ratio is another measure of valuation levels, calculated as the weighted average ratio of current share price divided by 12-month forward earnings per share.

Earnings growth is the weighted average growth in earnings per share of current portfolio holdings delivered over the past 5 years. This gives you an idea of how well a fund's holdings have performed in terms of profits growth.

Beta is a measure of systematic risk, denoting the sensitivity of a fund to the direction of the market. A beta higher than 1.0 indicates a greater degree of sensitivity to market direction.

Standard deviation is a measure of the volatility of absolute returns, indicating the dispersion of a set of absolute returns from its mean.

The market environment is a crucial factor to consider when evaluating an investment strategy. Emerging markets, for instance, have shown resilience despite concerns over a U.S. slowdown and China's economic headwinds.

India's equity market delivered a robust performance, driven by high economic growth rates and a more balanced growth trajectory that includes services and consumption. This is a promising sign for investors.

Taiwan's technology-heavy market, on the other hand, faced challenges due to strong prior performance and questions over valuations. Meanwhile, China's economy struggled with weak consumer sentiment and declining property prices.

However, China's markets rallied after the central bank launched a broad stimulus package. This package aimed to add liquidity, aid the property market, and boost equity markets.

In North Asia, South Korea's market underperformed against the benchmark, with semiconductor stocks particularly soft. Latin America's major markets also faced domestic headwinds, including uncertainty over potential policies in Mexico and high inflation in Brazil.

Here's a brief overview of the market performance in various regions:

The Fund aims to achieve long-term capital appreciation by investing in a broad range of equity securities of companies in emerging market countries.

The Fund's investment focus is on equity securities, with at least 80% of its assets normally invested in such securities.

The Fund was launched on 31 January 2020.

It's a SICAV (Société d'Investissement à Capital Variable) type fund.

The Fund offers investments in USD, EUR, and GBP currencies.

The Fund has a UK Reportable income requirement for shareholders.

Here are the key details of the Fund at a glance: