GQG Partners Emerging Markets Equity

GQG Partners is one of the newest and fastest growing asset management businesses, having launched in 2016. Rajiv Jain, founder of the company and lead manager of this fund, has over 25 years’ investment experience. GQG Partners Emerging Markets Equity is a concentrated portfolio of high quality companies with durable earnings. The emphasis is on future quality, rather than companies which have simply done well historically.

Our opinion

Investors have clearly warmed to GQG given its exceptional growth. It is not hard to see why. This fund and business has a very clear and well thought out approach and the manager is extremely experienced. We think the well-designed process and flat structure of the team puts the GQG Partners Emerging Markets Equity fund in a strong position to outperform in the future. We like the investment they’ve made in research and the use of former investigative journalists and specialist accountants to help give them an edge.

Fund manager

Rajiv Jain is not only the founder and chairman of GQG, but he is also the lead manager for all investment strategies. Rajiv has over 25 years' investment experience. Prior to GQG he worked at Vontobel Asset Management where he helped build the business from less than US$400 million under management to just under US$50 billion in 2016. He joined Vontobel Asset Management in 1994 from Swiss Bank Corporation. He has an MBA in Finance and International Business from the University of Miami. He also has a master’s degree from the University of Ajmer and an undergraduate degree in accounting with honours.

Co-managers Brian Kersmanc and Sudarshan Murthy joined the fund in September 2019. They are both portfolio managers for all GQG investment strategies. Brian joined GQG Partners in 2016 as a senior investment analyst, prior to which he was an analyst on the small/mid-cap equity research team at Jennison Associates, having begun his career in 2008 at Brown Brothers Harriman. He has an MBA from Rutgers University and a BA from the University of Connecticut. Sudarshan joined GQG in 2016 as a senior investment analyst, prior to which he spent five years as a generalist analyst in Asian equities at Matthews International Capital.

I strongly believe that a portfolio manager should be invested in their own products because that gives you very good perspective on how they’re likely to behave.

Rajiv JainFund manager

Investment process

Idea generation for GQG Partners Emerging Markets Equity begins with a proprietary quantitative screen. This filters an initial global universe of 50,000 stocks to just 300 to 350 for further research. Examples of the attributes screened for include stable financial and solid balance sheets; profitability; efficiency; sustainable businesses and liquidity.

The team then ranks the pool of names on a 1-10 basis (10 being the best) on each of the screening criteria. The weighted average of these scores gives an overall quality rating. The results of the screen, which is run on a monthly basis, are a source of ideas for further qualitative research.

Once a potential idea is identified, further research is conducted on its drivers of success; barriers to entry; sustainability of the industry; effectiveness of management; the regulatory environment and customer behaviour. Analysts perform financial statement analysis on the names they cover, and model estimated earnings potential over the next five years.

The team includes an accounting specialist who will examine the accounts in greater detail to find potential yellow and red flags and, in addition, GQG likes to hire some analysts with a background outside finance in a ‘non-traditional’ approach. As such, the analyst team includes a number of former investigative journalists. This gives it insights outside the traditional Wall Street sell-side model and allows the team to see potential risk others may miss.

Once a business is deemed high enough quality, it is valued based on earnings estimates for the next five years. A stock is only purchased when it is trading at a significant discount to the intrinsic value estimate.

ESG

ESG - Integrated  

GQG takes an integrated approach that factors ESG considerations into the analysis of potential portfolio companies. GQG believes long-term earnings potential is often tied to a company’s ability to adapt to a changing marketplace and, in the context of ESG, to the emerging challenges facing the environment and society. The managers place great importance on a strong corporate culture and find that companies which demonstrate this quality tend to score higher on ESG metrics because they are focused on resiliency and sustainability over the long term. GQG aims to go beyond traditional research, looking at the intangible elements that impact a company’s long-term value.

This fund is supported by a team of analysts with experience in investigative journalism who can carry out in-depth research and uncover aspects of a company that are often overlooked. The team also uses ESG ratings from Sustainalytics in its initial stock screening process. Discretion is used when considering investing in a stock which may be involved in a controversial industry or practice. The team also engages with the management teams of the companies owned within the portfolio.

Risk

The fund is concentrated and benchmark agnostic but there are some guidelines. Maximum position sizes are limited to 7%, the fund must own at least 5 different sectors at all times and there is a maximum overweight to any one country of 20%.

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Read more about this fund

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