Two years ago, a group of investment management professionals based in Singapore and London announced the launch of a new approach to investing into Emerging Markets. Instead of conforming to the approach adopted by most global emerging markets managers, where all markets are managed under the same roof, often by a star name like Mark Mobius, Milltrust claimed that better alpha was available by harnessing the talents of the best regional asset managers, who live, breath and invest in their own markets.

With a line-up of managers drawn from well-known financial institutions around the globe, Milltrust launched its EMMA platform (“Emerging Markets Managed Accounts”), giving its clients the option to select their own weightings across the various geographies represented by the various funds, or to follow the advice of its investment committee, which publishes detailed asset allocation advice every quarter. Well, 24 months later, Milltrust International now finds itself amongst the best performers in the Emerging Markets equity asset class, not only for some of its single managers that make up the global universe, but also for its GEMS portfolio.

Milltrust’s clients already include both public and corporate pension funds, and since inception Milltrust have delivered circa +20% net returns for them, significantly outpacing the market indices (MSCI EM Index: 12%), and many of their peers (see table below – returns up to the end of March 2014).

Milltrust has built its global EM offering by appointing locally-based investment teams to run regional strategies across the developing world and attributes its success to following some basic investment principles, explains Eric Anderson, Managing Partner at Milltrust International in London. Anderson’s cardinal rules are:

(1) Do your homework. This is particularly relevant in Emerging Markets where the range between good and bad companies is huge. Milltrust works with managers that place a huge emphasis on primary research and have large teams of professional analysts at their disposal. Not everything is always what it appears to be in the developing world, so you must do your research.

(2) Leave the bad stories for someone else. The case for passive investing in Emerging Markets has diminished sharply. Not every company in the index deserves to be owned so why should you be forced to have them in your portfolio; in many cases index weightings are often poor representations of the domestic growth drivers. The alpha generation in these markets is driven by active managers picking good stocks, irrespective of their inclusion in the index.

(3) Only work with the best. These are the locally-based investment houses that have the corporate strength to ensure longevity, strong governance and oversight, proper regulation and a long-term commitement to their investors. Their investment teams will also have the necessary bandwidth, access and penetration in these regions to maintain a strong informational edge in what are fast-growing and deepening markets.

The Emerging Markets have been an incredibly tricky and difficult place to be invested in over the past few years, and still, some strong headwinds exist. However, investors simply cannot afford to ignore a region which accounts for nearly 50% of global GDP growth, especially as the developing world represents 80% of the world’s population leaving plenty of room for more growth. The question should not be whether to invest, but how to invest. Milltrust seems to have put together a strong case for its approach.

 

ABOUT MILLTRUST

Milltrust is an award-winning specialist investment firm focused on Emerging Markets equities (EMMA) and Milltrust Agricultural Investments (MAI). The firm is co-headquartered in the asset management hubs of London and Singapore, with regional offices around the world.

EMMA is a regulated, single-custody multimanager platform which offers a flexible alternative to the typical global emerging markets fund. Milltrust’s proposition is not structured as a Fund of Funds, instead regional Emerging Markets Funds are housed on a single custodial platform at State Street Bank. This allows investors to see their investments across the Funds aggregated into a single report and removes the necessity for an over-arching fund of funds structure or any additional fees. Learn more about Milltrust’s Emerging Markets Managed Accounts (EMMA) here (video):http://youtu.be/Zmwrw9iPQbE

MAI (Emerging Markets Land Opportunities) is a segregated portfolio company of emerging markets-focused investment opportunities, offering access to farmland investments diversified across geography, climate, and crops, managed by best-of-breed specialist agricultural teams. The pipeline includes projects in Peru, Paraguay, Brazil and Uruguay, and Australia and New Zealand. Learn more about Milltrust Agricultural Investments (MAI) here (video):http://youtu.be/z2JQgZL7rW0