SICAV

Emerging Markets Equity Fund

Seeking to capture compelling growth opportunities in dynamic emerging markets.

ISIN LU0133084979 Valoren 1274281

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

4.44%
$2.5b

1YR Return
(View Total Returns)

Manager Tenure

-1.67%
11yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.82
3.39%

Inception Date 02-Dec-2003

Performance figures calculated in USD

Other Literature

30-Jun-2020 - Gonzalo Pángaro, Portfolio Manager,
Emerging markets are currently experiencing a great deal of disparity in terms of sector and stock performance and, in our view, this creates many opportunities for disciplined fundamental investors. Drawing on our deep experience of investing through other periods of market stress, our long-term focus is helping us to look beyond the near-term uncertainties. Our approach is to invest in high-quality companies that we think may weather difficult times and emerge in a stronger position.
Gonzalo Pángaro
Gonzalo Pángaro, Portfolio Manager

Gonzalo Pángaro is the lead portfolio manager for the Emerging Markets Equity Strategy in the Equity Division. He is chairman of the Investment Advisory Committee for the Emerging Markets Equity Strategy  and a member of the International Equity Steering Committee. Gonzalo is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

 

Strategy

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks of emerging market companies.

Investment Approach

  • Employ fundamental analysis to identify companies with sustainable above-market earnings growth rates.
  • Focus on franchise strength, management team quality, free cash flow, and financing/balance sheet structure.
  • Verify relative valuation appeal versus both local market and broad sector opportunity set.
  • Apply negative screening for macroeconomic and political factors to temper bottom-up enthusiasm for specific securities.

Portfolio Construction

  • Typically 80-100 stocks
  • Expected 3-7% tracking error
  • Individual positions typically range from 0.30% to 6.00% — average position size from 0.50% to 1.00%
  • Country ranges +/- 10% absolute deviation from the benchmark
  • Sector ranges +/- 15% absolute deviation from the benchmark
  • Reserves are typically less than 5%
  • Expected Turnover range: 20-40%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % -1.67% 4.44% 5.64% 4.87% 9.81%
Indicative Benchmark % -3.39% 1.90% 2.86% 3.27% 7.64%
Excess Return % 1.72% 2.54% 2.78% 1.60% 2.17%

Inception Date 02-Dec-2003

Manager Inception Date 31-Mar-2009

Indicative Benchmark: MSCI Emerging Markets Index Net

Data as of  30-Jun-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % -1.67% 4.44% 5.64% 4.87%
Indicative Benchmark % -3.39% 1.90% 2.86% 3.27%
Excess Return % 1.72% 2.54% 2.78% 1.60%

Inception Date 02-Dec-2003

Indicative Benchmark: MSCI Emerging Markets Index Net

Data as of  30-Jun-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 07-Aug-2020 Quarter to DateData as of 07-Aug-2020 Year to DateData as of 07-Aug-2020 1 MonthData as of 30-Jun-2020 3 MonthsData as of 30-Jun-2020
Fund % -0.09% 9.53% -1.43% 8.50% 17.85%
Indicative Benchmark % 0.99% 10.02% -0.75% 7.35% 18.08%
Excess Return % -1.08% -0.49% -0.68% 1.15% -0.23%

Inception Date 02-Dec-2003

Indicative Benchmark: MSCI Emerging Markets Index Net

Indicative Benchmark: MSCI Emerging Markets Index Net

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Index returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

30-Jun-2020 - Gonzalo Pángaro, Portfolio Manager,
Emerging market equities rose in June in U.S. dollar terms and outperformed the MSCI World Index. Global equity markets continued to recover, as large-scale monetary and fiscal easing across the world and tentative signs of an uptick in economic activity provided a helpful backdrop for risk assets. Positive developments included better-than-expected employment data in the U.S. as well as signs of economic recovery in China. This was offset by investor concerns over the spread of the coronavirus in some key emerging markets, and tensions between the U.S. and China. At the portfolio level, our choice of securities in the communication services sector was beneficial. Shares in Tencent, which operates the dominant social media platform in China, strongly outperformed. We maintain a significant position in the company as it has advantages such as a sizeable user base and, in our view, a strong position in the mobile internet market in China, We believe there is ample scope for further monetisation in mobile, particularly in areas such as advertising and internet finance.

Holdings

Total
Holdings
86
Largest Holding Tencent Holdings 8.87% Was (31-Mar-2020) 8.07%
Other View Full Holdings Quarterly data as of 30-Jun-2020
Top 10 Holdings 46.39% View Top 10 Holdings Monthly data as of 30-Jun-2020

Largest Top Contributor^

Tencent Holdings
By 1.27%
% of fund 8.89%

Largest Top Detractor^

Credicorp
By -0.43%
% of fund 1.12%

^Absolute

Quarterly Data as of 30-Jun-2020

Top Purchase

Tencent Holdings
8.88%
Was (31-Mar-2020) 8.07%

Top Sale

National Commercial Bank
0.02%
Was (31-Mar-2020) 0.46%

Quarterly Data as of 30-Jun-2020

31-Dec-2018 - Gonzalo Pángaro, Portfolio Manager,

We believe (as we have for some time) that, by and large, emerging market countries are in relatively good economic shape. When compared with developed markets, and particularly the U.S., they are at an earlier stage in terms of economic recovery and also in terms of improvements in earnings and margins. However, emerging markets have seen volatile conditions in the recent sell-off in global equities; while we remain mindful of the risks to the asset class, such as continued trade tensions between the U.S. and China and the future path of U.S. monetary policy, our view is that valuations are at attractive levels, while currencies have also corrected. Indeed, we have been taking advantage of this volatility to add to our positions in companies where we have a high level of conviction over their long-term prospects.

Overall, the portfolio continues to have a growth tilt. We are overweight to the IT sector, consumer-related stocks, and financials, where our highly detailed investment research is helping us to identify companies that we believe offer good growth potential. We are underweight to areas of the market where we struggle to find companies with sufficient scope for growth, such as energy, materials, and telecom names.

We Retain Our Overweight To IT; Sector Remains One Of The Largest In Emerging Markets

The size of the IT sector in emerging markets has fallen since the recent MSCI sector reclassification, with several companies (including some names that we continue to own in the portfolio, such as Chinese internet companies Alibaba and Tencent) being moved to either the consumer discretionary space or the new communication services sector. However, IT remains one of the largest sectors within emerging markets, and we retain our overweight.

During the quarter, we initiated a position in Brazilian company Stone, which engages in the provision of financial technology solutions. The company processes payments, which we believe gives it a great deal of scope to grow and expand into other segments and businesses. We met the company following an investment research trip to Brazil in November, and we believe it offers compelling investment potential.

Private Sector Banks In India Are Continuing To Gain Market Share

The portfolio is overweight to financials, the largest sector in emerging markets, where we have identified good investment potential among selected banking and insurance stocks across a range of countries. For example, in India, we think there are some significant tailwinds for private sector banks. Broadly speaking, in our view, the state-owned banks in India are continuing to suffer from some poor loans and poor asset quality, and this is curbing the amount of capital they have to grow their loan books. The private banks are stepping into that gap; by and large they are taking market share in terms of credit growth, and return on equity is improving. These companies are also investing in their online banking and product offerings, and we think that this is helping them to build a stronger competitive position. While we are mindful of recent issues in the wholesale funding market in India, we believe that the risks have reduced. Overall, our view is that the banks that we own here have high-quality balance sheets and diversified sources of funding, with less dependence on wholesale funding. Another issue we are cognizant of is the recent change in leadership of the Reserve Bank of India following the unexpected resignation of the previous central bank head, who had disagreements with Prime Minister Narendra Modi over monetary policy. While we do not view this as a significant near-term risk, we will be monitoring the situation closely.

Over the quarter, we initiated or added to some positions in the financials sector and trimmed our holdings in a number of other names.

    • We initiated a position in Brazilian stock exchange company B3, following an investment research trip to Brazil in November and a meeting with the company's CFO. We would expect the stock to benefit from an environment of improving growth and market performance. With interest rates coming down and risk appetite increasing, we believe there are a number of tailwinds for the equity market environment and, therefore, the company's earnings. B3 also trades at a discount to other global exchanges.
    • We added to our position in Al Rajhi, Saudi Arabia's second-largest bank. The Saudi banking sector is favorably positioned, in our view; it is an oligopolistic market with high barriers to entry. We expect the banks to benefit from interest rate hikes from the U.S. Federal Reserve (given the Saudi currency's peg to the U.S. dollar). In our view, economic expansion and loan growth are also set to recover. We believe that Al Rajhi is the highest-quality Saudi bank, and we expect it to grow margins and return on equity.
    • We added to our position in South African insurer Sanlam, which offers both life and non-life cover as well as other financial services. We prefer the name to fellow South African financial services group FirstRand (which we also hold; see below for further details) and switched some of our holding in this company into Sanlam. We also believe that Sanlam is good operationally, and the company continues to take market share.
    • We trimmed our position in South African group FirstRand, which, in our view, is the highest-quality bank in emerging markets, with superior return on equity. We believe the medium- to long-term prospects for the company remain on track, although on a near-term view the valuation is looking a little stretched after strong outperformance. We have, therefore, taken some profits and switched into insurer Sanlam (see above for further details).
    • We trimmed our position in Brazilian name Itau Unibanco on strong outperformance. The bank remains a core position for the portfolio, given the supportive domestic environment, as loan growth picks up and consumer confidence rebounds. The banking industry structure in Brazil is also attractive, in our view, with a high level of consolidation and a well-capitalized system.
    • We reduced our position in Ping An, China's largest insurer. The company's advanced technology platform is a competitive advantage, in our view, and also provides other financial technology options and opportunities. We continue to like the name for what we see as its favorable long-term fundamentals, but given the increased equity market volatility at present, associated with "trade war" rhetoric escalation, we have trimmed the position as the company has high equity market exposure.

Growing Prosperity Across Developing World Is Providing A Strong Tailwind For Consumer Stocks, In Our View

Increased prosperity across the emerging world remains a powerful medium- to long-term trend, in our view. We have identified several companies that we believe are well placed to take advantage of the considerable business opportunities that this growing wealth presents; as a result, the portfolio has a large overweight to consumer-related stocks.

Over the period, we trimmed our holding in Brazilian name Lojas Renner, one of our largest relative positions, following a strong period of outperformance in the wake of Jair Bolsonaro's election victory. We believe the apparel retailer has strong operational efficiency, and, in our view, this may enable it to continue to take market share. The improving consumer environment may provide a further boost. Given Lojas Renner's significant recent outperformance, taking some profits seemed prudent, in our view.

Portfolio Remains Underweight To Commodity-Driven Sectors

We retain our long-standing underweight to the commodity-driven energy and materials sectors. Broadly speaking, we struggle to identify stocks in these areas of the market with sufficient growth potential, while we continue to have a negative view on the longer-term outlook for the price of oil. Having said that, we have stock-specific positions in markets including Russia and the United Arab Emirates, partially as a counterbalance to our large underweight to energy; both markets are correlated to oil-price trends.

We have also identified some stock-specific opportunities in the materials space and made some changes to our holdings here over the quarter; we initiated a position in a pulp producer and trimmed our holding in a mining stock.

    • We initiated a position in Brazilian company Suzano, which became the world's largest pulp producer following a merger. Suzano is a relatively low-cost producer, and with strong pulp demand and robust free cash flow generation, we believe the near-term outlook for the company is supportive.
    • We reduced our holding in Fresnillo, a Mexican gold mining company listed in London. We trimmed the name because we believe production has peaked and also on concerns about a deteriorating political environment with the election victory last year of left wing populist candidate Andres Manuel Lopez Obrador. In our view, the risk outlook and risk premium for the stock has increased on the back of this development.

We Are Underweight To Communication Services, Largely A Result Of Low Exposure To Telecom Names

One of the key changes in the recent MSCI sector reclassification was that the telecommunication services sector was expanded and renamed communication services. As part of the changes, some securities previously assigned to information technology or consumer discretionary were reclassified as communication services. We are underweight to the new sector, largely a result of our low exposure to telecommunications stocks; this area of the market is relatively mature and "ex growth" even within the emerging world.

However, we have a sizable position in communication services in absolute terms, largely a result of names that have moved across from other sectors during the reclassification and which we continue to hold in the portfolio, the foremost of which is Chinese internet stock Tencent, in which we continue to have a high level of conviction.

Sectors

Total
Sectors
10
Largest Sector Financials 25.08% Was (31-May-2020) 25.44%
Other View complete Sector Diversification

Monthly Data as of 30-Jun-2020

Indicative Benchmark: MSCI Emerging Markets Index

Top Contributor^

Communication Services
Net Contribution 1.10%
Sector
-0.07%
Selection 1.17%

Top Detractor^

Information Technology
Net Contribution -0.79%
Sector
0.11%
Selection
-0.90%

^Relative

Quarterly Data as of 30-Jun-2020

Largest Overweight

Consumer Staples
By10.46%
Fund 16.94%
Indicative Benchmark 6.48%

Largest Underweight

Energy
By-5.52%
Fund 0.42%
Indicative Benchmark 5.95%

Monthly Data as of 30-Jun-2020

30-Jun-2020 - Gonzalo Pángaro, Portfolio Manager,
The portfolio is overweight financials, one of the largest sectors in emerging markets. We hold a diverse mix of high-quality banks, insurers, and fintech firms across a number of countries, with a focus on companies in a robust capital position with strong liquidity and balance sheet structures. One of our main positions here is an off-benchmark holding in Hong Kong-listed life insurance company AIA. We have a high level of conviction in AIA on a longer-term view, due to the advantages we believe it has in terms of distribution and geographic footprint in a structurally growing market.

Countries

Total
Countries
23
Largest Country China 33.26% Was (31-May-2020) 32.72%
Other View complete Country Diversification

Monthly Data as of 30-Jun-2020

Indicative Benchmark: MSCI Emerging Markets Index

Top Contributor^

China
Net Contribution 0.87%
Country
0.16%
Selection 0.71%

Top Detractor^

South Africa
Net Contribution -0.76%
Country
-0.03%
Selection
-0.73%

^Relative

Quarterly Data as of 30-Jun-2020

Largest Overweight

Hong Kong
By3.20%
Fund 3.20%
Indicative Benchmark 0.00%

Largest Underweight

China
By-7.78%
Fund 33.26%
Indicative Benchmark 41.04%

Monthly Data as of 30-Jun-2020

30-Jun-2020 - Gonzalo Pángaro, Portfolio Manager,
We have a sizeable position in South Korea in absolute terms, and a small overweight, with a few stock-specific positions among technology-related and consumer businesses. The portfolio has a long-standing holding in consumer staples company LG Household & Health Care (LGH&H), which has a diversified business presence in household products, beverages, and cosmetics, where it has several leading brands. We believe LGH&H is a high-quality company with strong management and attractive growth prospects.

Team (As of 05-Aug-2020)

Gonzalo Pángaro

Gonzalo Pángaro is the lead portfolio manager for the Emerging Markets Equity Strategy in the Equity Division. He is chairman of the Investment Advisory Committee for the Emerging Markets Equity Strategy  and a member of the International Equity Steering Committee. Gonzalo is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Gonzalo’s investment experience began in 1991, and he has been with T. Rowe Price since 1995, beginning in the Buenos Aires office as an analyst, covering Latin American equities from Buenos Aires. After that, he served as head of International Research from 2000 to 2004. He also has been instrumental in the development of the firm's non-U.S. research capabilities. Prior to T. Rowe Price, Gonzalo was employed by Robert Fleming as head of Argentine research, covering Latin American utilities. He also was an investment analyst with Banco Mildesa, specializing in the Argentine market. 

Gonzalo earned a bachelor's degree in business administration from Argentine Catholic University and a master's degree in finance from CEMA University (Centro de Estudios Macroeconomicos de la Argentina). Gonzalo also has earned the Chartered Financial Analyst® designation. In addition to English, Gonzalo is fluent in Spanish and Portuguese.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2009
  • Years at
    T. Rowe Price
    22
  • Years investment
    experience
    29
Nick Beecroft

Nicholas Beecroft is a portfolio specialist in the Equity Division at T. Rowe Price, representing the firm's global equity strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Beecroft has 18 years of investment experience, 14 of which have been with T. Rowe Price. He joined the firm in London in 2005 and spent many years working with our emerging markets equity team. Mr. Beecroft has been based in Hong Kong since 2011. Prior to joining T. Rowe Price, he was an investment analyst at Mercer Investment Consulting.

Mr. Beecroft earned a B.A, with honours, in contemporary European studies from the University of Southampton. He also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    15
  • Years investment
    experience
    19
Charles Knudsen, CFA

Chuck Knudsen is a portfolio specialist in the Equity Division. He also is a member of the Emerging Markets Equity team. Chuck is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc. 

Chuck’s investment experience began in 1987, and he has been with T. Rowe Price since 2005, beginning in the Global Investment Services department, the organization responsible for the firm's institutional business worldwide. After that, he was the associate head of Institutional Client Service, North America, for Global Investment Services. Prior to T. Rowe Price, Chuck was a senior vice president with Legg Mason Capital Management for three years, servicing many of the firm's large, global institutional clients. He also spent 15 years with Allied Investment Advisors, where he oversaw the Client Service team, was an equity analyst, and served as the portfolio manager for the Ark Funds Balanced Portfolio.

Chuck earned a B.A. from Duke University and an M.B.A. in finance and investments from George Washington University. He also has earned the Chartered Financial Analyst® designation and is a Series 7 and 63 registered representative.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Years at
    T. Rowe Price
    15
  • Years investment
    experience
    33

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 190 basis points 2.01%
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.06%
Class Jd $10,000,000 $0 $0 0.00% 0 basis points 0.10%
Class Q $1,000 $100 $100 0.00% 100 basis points 1.10%
Class S $10,000,000 $0 $0 0.00% 0 basis points 0.06%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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