Somerset Capital Management portfolio managers Mark Williams and Kumar Pandit have generated strong outperformance (+9.2%) with Somerset’s Emerging Markets Dividend Growth Strategy over the MSCI Emerging Markets Index during the past three years.
Performance at the circa £3bn emerging markets investment management firm has been driven by the managers’ strategy of identifying companies with sustainable earnings growth and practicing valuation discipline in regional equity markets.
Williams and Pandit structure a concentrated portfolio of 30-50 companies with strong, sustainable earnings that either pay or are forecast to pay dividends within their investment horizon. Supported by a team of fund managers and analysts based in London, Singapore and Shanghai, the co-managers predominantly invest in tech, financial, industrial and consumer companies operating in China, Taiwan, India, Brazil and South Korea. Additional holdings in other places such as Hong Kong, Kazakhstan, Georgia and Nigeria reinforce Somerset’s diversified, holistic investment approach.
According to Williams and Pandit, equity markets in China and Southeast Asia, in particular, present some promising investment opportunities despite perceived regional headwinds, supporting the strategy’s objective to produce long-term total returns via a combination of growth and income.
China continues to provide select opportunities for the Strategy amid a challenging transition from tight Covid restrictions still in place less than a year ago. Although areas of current and future overcapacity remain, Williams and Pandit support the view that China has sufficient assets on its balance sheet to orchestrate an ongoing return to growth approaching 5% in the coming years and are confident in the potential for attractive medium- to long-term alpha generation. By identifying resilient companies in the growing tech and AI sectors, the co-managers say they have been able to significantly reduce macroeconomic risk and unlock an expansive supply chain ecosystem that benefits from unwavering global demand for technological development.
Williams and Pandit are also paying close attention to the growth potential of India, increasing exposure to the country’s equity market as valuations hit attractive entry points. They believe that there is a particularly long runway of growth in India’s document servicing industry and home mortgage market.
