Back in 1930, we made our first emerging market investment in Peru. Today, we manage more than AUD 48 billion (December 2019) in a wide range of emerging market strategies.
Emerging markets are not homogeneous but instead a grouping of very different countries that are in constant evolution and at different stages of development. With investments often driven by retail investors and short-term market noise, it is vital to have a long-term view to uncover structural drivers in emerging markets.
This long-term investment view and Robeco’s quant and sustainable investing capabilities together allow us to harness the diverse opportunities across emerging markets.
All investment decisions should be research driven. This was our founders’ firm belief and it is especially true for emerging markets, where data can be challenging due to shorter time series or the need for data cleansing. A strong focus on research and data analysis is pivotal to finding opportunities in inefficient markets and benefiting from the risks and opportunities. Robeco researchers, for example, have published a fantastic collection of articles demonstrating the success of factor investing in emerging markets. But the real beneficiaries of these insights are our clients.
Factors work better in emerging markets—the less mature the market is, the larger returns from anomalies are. A wide range of EM strategies are based on our proven factor investing models, from low volatility to enhanced indexing, to sustainable versions with specific carbon targets. We were one of the first to offer quantitative emerging market strategies and to launch a low-volatility strategy, and to develop Chinese A-shares quant strategies. Our Quantitative Equities team now manages over AUD 36 billion (December 2019) in emerging markets strategies.
Emerging markets often feature poor transparency, lower governance standards, human rights issues, and lack product safety standards. Integrating ESG in investment decisions is a challenge. However, in emerging markets most of all, researching ESG data in-depth is key to uncovering ESG-related risks and unlocking the potential source of alpha in ESG information for investors.
We integrate ESG analysis into the investment decision-making process for all our emerging market capabilities. And our emerging markets team has incorporated sustainability into its company analysis for over 15 years and been conducting its proprietary ESG survey since 2001.