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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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SICAV

Emerging Markets Discovery Equity Fund

Utilises a contrarian approach to invest in undervalued emerging markets companies positioned to benefit from a re-rating thesis for change.

ISIN LU1244138340 Bloomberg TREMVEI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

11.04%
$121.3m

1YR Return
(View Total Returns)

Manager Tenure

35.82%
6yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.11
6.24%

Inception Date 14-Sep-2015

Performance figures calculated in USD

31-Oct-2021 - Ernest Yeung, Portfolio Manager,
Given the pace of vaccination and easing of coronavirus restrictions, we expect economic activity in some emerging market (EM) countries may continue normalising in the next six months, providing a favourable backdrop for value investing. We think "forgotten" EM stocks may be helped by government stimulus policies and "green" infrastructure spending, benefitting traditional industries.
Ernest C. Yeung, CFA
Ernest C. Yeung, CFA, Portfolio Manager

Ernest Yeung is a portfolio manager for the Emerging Markets Discovery Equity Strategy at T. Rowe Price. He was the co-portfolio manager for the International Small-Cap Equity Strategies from 2009 to 2014. Mr. Yeung is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited.

Click for Manager Outlook
 

Strategy

Manager's Outlook

Value investing has staged an impressive rebound in 2021 on the back of a successful vaccine rollout and strong global economic recovery. We believe accelerating economic activities in EM countries which are emerging from the coronavirus pandemic will provide a favorable backdrop for value investing

We believe that that the goal of carbon neutrality by 2050, (2060 for China) will boost many traditional or old economy industries during the long transition period. To meet green energy and carbon emission targets, the world will need to spend heavily on traditional industrial sectors during the transition years. The massive infrastructure spending in China between 2000 and 2010 was one factor contributing to a decade of outperformance for global value investors.

China's crackdown in the technology, property and education sectors may have spooked investors but we have seen these regulatory cycles repeated every three-to-five years and this is hardly surprising to us. We need to identify these mini cycles as we are confident they will grease the wheels of the economy to allow it to get over the hump.

Renewable energy is not readily available in most EMs, and we believe natural gas will play an important role in the early stages of their transition to cleaner energy.

The post-COVID energy transition is the type of external fundamental change that we seek to leverage under our EM Discovery investment thesis. We believe the world has badly underinvested in this area, and EM countries will likely need to ramp up capital expenditure quickly if net carbon reduction targets are to be met.

The acceleration of new technologies triggered by the pandemic could usher in a period of higher productivity and such periods have tended to favor value stocks, as higher productivity, in turn, can be expected to result in stronger growth in earnings. Our portfolio is well positioned to capture the opportunity in emerging markets, including the transition to green energy. We continue to harness the deep insights and resources of our global research platform. It provides us with an information edge that is crucial in helping us to identify "forgotten" EM companies with solid improvement potential and asymmetric risk reward.

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 widely diversified portfolio of stocks of emerging market companies.

Investment Approach

  • Aim to exploit the valuation anomalies that arise across the diverse and inefficient emerging market opportunity set.
  • Employ a contrarian approach using fundamental research, quantitative screen and industry contacts to identify companies that are out of favour, undervalued and that offer an attractive risk and reward profile.
  • Minimize the risk of value traps by focusing on companies offering yield or a book value anchor to the valuation, and where we have identified re-rating thesis that can lead to an expansion in valuation over time.
  • Risk management is an integral part of the portfolio construction process.
  • Environmental, social and governance ("ESG") factors with particular focus on those considered most likely to have a material impact on the performance of the holdings or potential holdings in the funds’ portfolio are assessed. These ESG factors, which are incorporated into the investment process alongside financials, valuation, macro-economics and other factors, are components of the investment decision. Consequently, ESG factors are not the sole driver of an investment decision but are instead one of several important inputs considered during investment analysis.

Portfolio Construction

  • Typically 50-80 stock portfolio
  • Expected 4-8% tracking error
  • Individual position typically 0.5% to 5%, position sized by prospective risks
  • Country ranges +/-10% absolute deviation from the benchmark
  • Sector ranges +/-15% absolute deviation from the benchmark
  • Reserves are normally less than 5%, max 10%

Recent Performance

  Month to DateData as of 03-Dec-2021 Quarter to DateData as of 03-Dec-2021 Year to DateData as of 03-Dec-2021 1 MonthData as of 31-Oct-2021 3 MonthsData as of 31-Oct-2021
Fund % -0.06% -2.00% 2.79% 2.83% 1.20%
Indicative Benchmark % 1.07% -2.09% -3.31% 0.99% -0.49%
Excess Return % -1.13% 0.09% 6.10% 1.84% 1.69%

Inception Date 14-Sep-2015

Indicative Benchmark: MSCI Emerging Markets Index Net

Indicative Benchmark: MSCI Emerging Markets Index Net

Performance figures calculated in USD

Sectors

Total
Sectors
11
Largest Sector Financials 27.09% Was (30-Sep-2021) 28.13%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2021

Indicative Benchmark: MSCI Emerging Markets Index

Top Contributor^

Industrials & Business Services
Net Contribution 1.27%
Sector
0.08%
Selection 1.19%

Top Detractor^

Consumer Staples
Net Contribution -1.03%
Sector
0.02%
Selection
-1.05%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Financials
By7.45%
Fund 27.09%
Indicative Benchmark 19.64%

Largest Underweight

Information Technology
By-9.65%
Fund 10.98%
Indicative Benchmark 20.62%

Monthly Data as of 31-Oct-2021

31-Oct-2021 - Ernest Yeung, Portfolio Manager,
We closed our underweight in consumer discretionary, adding to our position in the internet and auto spaces, increasing our holding in a Chinese auto supplier. We reduced our overweight in financials by managing positions in selected banks, and in an insurer after recent management and agency turnover made its value of new business vulnerable to disappointment, in our view. The financials sector continues to be our largest sector position in both absolute and relative terms. The portfolio is underweight in the information technology sector as our investment criteria favours "forgotten" or out-of-favor stocks with asymmetric risk/reward profiles.

Countries

Total
Countries
21
Largest Country China 30.92% Was (30-Sep-2021) 30.64%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2021

Indicative Benchmark: MSCI Emerging Markets Index

Top Contributor^

China
Net Contribution 3.09%
Country
0.44%
Selection 2.65%

Top Detractor^

Taiwan
Net Contribution -0.68%
Country
-0.65%
Selection
-0.03%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Netherlands
By4.90%
Fund 4.90%
Indicative Benchmark 0.00%

Largest Underweight

Taiwan
By-10.17%
Fund 4.35%
Indicative Benchmark 14.52%

Monthly Data as of 31-Oct-2021

31-Oct-2021 - Ernest Yeung, Portfolio Manager,
Our China underweight position increased as we cut our holdings in a smartphone acoustic component supplier. We initiated a position in a Chinese e-commerce platform. We also increased our position in a technology conglomerate, which raised our off-benchmark exposure to the Netherlands. We added to our position in a precious metal company in Mexico, where we now have one of our largest country positions in absolute and relative terms.

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 2.07%
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.10%
Class Q $1,000 $100 $100 0.00% 100 basis points 1.17%

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