ABSL Global Emerging Market Equity Fund

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About Aditya Birla Sun Life AMC

Established in 1994, Aditya Birla Sun Life AMC Limited (ABSLAMC) is co-owned and backed by Aditya Birla Capital Limited (ABCL) and Sun Life (India) AMC Investments Inc. ABSLAMC is primarily the investment manager of Aditya Birla Sun Life Mutual Fund, a registered trust under the Indian Trusts Act, 1882. ABSLAMC also operates multiple alternate strategies including Portfolio Management Services, Real Estate Investments and Alternative Investment Funds. ABSLAMC is one of the leading asset managers in India, servicing around 8.1 million investor folios with a pan India presence across 280 plus locations and a total AUM of over Rs.2,926 billion for the quarter ending June 30, 2022, under its suite of mutual fund (excluding our domestic FoFs), portfolio management services, offshore, and real estate offerings.

Fund Snapshot

Nature of the scheme Category II AIF under the IFSCA (Fund Manager) Regulations
Tenure 4.5 years, 1 year extendable
Target Corpus USD 200 million with green shoe option of up to USD 200 million
Fund Manager Utsav Shah
Redemption & Exit Load No exit option before maturity

Economic Outlook of Emerging Economies

  • GDP growth rate as well as Investment as a % of GDP has been higher in the emerging economies
  • IMF World Economic Outlook suggest that the same trend will continue in the future
  • IMF forecasts decreasing trend in the inflation rate in emerging economies but will still remain higher than advanced economies
  • Higher inflation in emerging markets reflects the high degree of economic activities in developing regions

Why Emerging Markets?

Impressive and Potent GDP growth history of emerging economies. Seven economies had real annual per capita GDP growth of at least 3.5 percent for 50 years, while 11 other, less-heralded economies grew at least 5.0 percent annually over the past 20 years.

Attractive EM opportunties

The chart shows the current P/B relative to current ROE for a range of countries.

EM as a whole and a range of large individual EM markets such as Brazil and China look attractive while US seem Relatively Expensive.

This result is generally consistent with ARGA’s fundamental, bottom- up company valuation models

Value Opportunity in Emerging Markets

The spreads in the charts above illustrate the value opportunity in Emerging Markets

Cyclically Adjusted Price to Earnings Ratio (CAPE) analysis indicates 10-year forward real returns of around 12% for Emerging Markets stocks. This is the highest relative to all equity regions worldwide

For comparison, second chart shows that the much higher US CAPE in recent past implies lower real returns over the coming decade

Value Premium in Emerging Economies

Within Emerging Markets, Historically Value stocks (cheapest 20%- Quintile 1 in terms of P/B) have outperformed average EM Stocks in MSCI EM universe by a significant margin (on an average of 10-15% annually over time).

Strong mean reversion observed in the return of cheapest quintile (20%) of price to book value stocks, with the average return of a stock in the MSCI emerging market universe. 

Why ARGA for Emerging Market (EM) focused value strategies

ARGA’s empirical research Indicate that value investing has added value over time across many geographies. ARGA believes that fear and uncertainty creates opportunity, and their EM strategy seeks to leverage on that opportunity to create return for their clients. ARGA’s active edge is their ability to identify and evaluate deeply discounted opportunities through technology-enhanced research and industry expertise.

Global value manager

Across environments and geographies

Industry experience

40+ Member Research & Investment Team

Global perspective

Developed and emerging markets locations

Client communication

Transparent

Alignment of interests

Employee-owned

Firm strengths

Commitment to value investing, validated by

  • History, across environments and geographies
  • Development of value-based tools

Commitment to clients, evidenced by

  • Focus on client results versus firm profits
  • Transparent communications

Commitment to ESG

  • Proprietary Global ESG Scoring Framework
  • Systematic ESG Process Integration
Competitive Strengths

Analyst longevity

  • Industry expertise
  • Global collaboration

Proprietary technology

  • Technology to augment judgement & apply relationship and algorithms
  • Comprehensive database system to structure institutional knowledge

Global Industry Models

  • Model content and interrelationships are proprietary and not easily replicated.
  • Models benefit their research quality, depth and breadth
  • Result is better comparisons of company forecast and valuation.
ARGA Advantage

ARGA Global Industry Models: Research Advantage

  • Insights across industries, geographies, companies
  • Consistency in forecasts and valuations
  • Global benchmark for assumptions, trends, ESG

ESG Experience

Proprietary ESG tools

  • ARGA Global ESG Scoring Framework flags ESG risks and opportunities

ESG process integration

  • ESG fully reflected in Global Industry Models, forecasts and valuations

ESG in portfolio construction

  • Exposure limits for ESG risks Stakeholder engagement
  • Enhance ESG outcomes

Organizational ESG commitment

  • Dedicated ESG Team
  • Climate Transition Team adds technical expertise

ABSL Global Emerging Market Equity Fund (IFSC)

Investment Strategy

The fund follows a passive investment strategy and will invest in units of ARGA Emerging Market Equity

Fund, except to meet its liquidity requirements.

Asset Allocation
Instrument Normal Allocation (% of total Assets)
Units of ARGA Emerging Market Equity Fund 90% – 100%
Fixed Deposits, Fixed Income Securities & Money Market Instruments 0% – 10% 
Underlying Fund

Investment Approach- Valuation

Invest in undervalued businesses based on fundamental research and present value

  • Investor overreaction results in exploitable anomalies
  • Stock screens identify potentially undervalued businesses
  • DDM Measures base and stress undervaluation
  • Consistent industry/company analysis drives DDM inputs
  • Adjust for company quality, ESG, economic risks
Investment success results from
  • Identifying, understanding and measuring the opportunity.
  • Using rigorous process devoid of bias.
Investment Philosophy

Overreaction creates market anomalies

  • Temporary stress disproportionately impacts valuations
  • As conditions normalize, valuations recover

This inefficiency is persistent and exploitable

  • Behavioral biases drive near-term focus
  • News adds fear and uncertainty
  • Exploitation requires long-term focus and research
Portfolio Construction Framework
  • Quantitative screening of the emerging markets universe to identify companies with a market cap over $500 million and sufficient investible liquidity
  • Filter top 1,000 companies on key value metrics: price to consensus forecast earnings, price to book value, dividend yield & earnings yield
  • Prioritizes the top 20% of ranked companies (Potential Buy Universe) for fundamental research
  • Eliminate ~80% of companies from potential “Buy” universe through one week fundamental research
  • In-depth research and modeling to assess long-term earnings power and dividend paying capability of the remaining Companies
  • Shortlist companies for investment basis their relative strength & valuation

About Fund Manager

Utsav Shah, Principal Officer & Head – GIFT IFSC

Mr. Utsav Shah

Mr. Utsav carries over 14 years of professional experience in Investments, Offshore Fund structuring, Product development. He has been instrumental in the success of various divisions of ABSLAMC before assuming the responsibility for GIFT IFSC initiatives. Prior to his current association, he worked with Morgan Stanley Investment Management. Mr. Utsav holds a Chartered Financial Analyst & Diploma from ICFAI, India and Associate Professional Risk Manager from PRMIA University.

Investment Strategy

The fund follows a passive investment strategy and will invest in units of ARGA Emerging Market Equity Fund, except to meet its liquidity requirements. The investment objective of the fund is to provide long-term capital appreciation by investing in units of ARGA Emerging Market Equity Fund.

Sector Exposure

Communication Services 6%
Consumer Discretionary 25%
Consumer Staples 5%
Energy 3%
Financials 31%
Industrials 3%
Information Technology 19%
Materials 3%
Real Estate 2%
Utilities 3%

Top 10 Holdings

Gree 5.0%
TSMC 4.7%
Samsung Electronics 4.4%
SK Hynix 3.8%
Alibaba 3.5%
Baidu 3.4%
POSCO 3.4%
PZU 3.3%
Melco Resorts 3.2%
Banco Bradesco 3.1%

Emerging Markets (Country) Exposure (%)

Brazil 10%
China 35%
Czech Republic 1%
Hong Kong 10%
Hungary 2%
India 1%
Poland 5%
South Africa 4%
South Korea 18%
Taiwan 7%
Thailand 7%

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Disclaimer: Investing Involves Risk. This document is for information purposes only and should not be viewed as a legal offering document or solicitation. Offers to invest in this fund are made only by the Discretionary Portfolio Management Services Agreement. Past performance does not guarantee future results and there is no assurance that the managed accounts will necessarily achieve their objectives. We do not guarantee any returns in the hand of investors not we take any sort of accountability for the performance of the scheme. The above-mentioned data is collected from the respected Fund house please verify the same at SEBI website.