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East Capital Global Emerging Markets Sustainable

East Capital Global Emerging Markets Sustainable

NAV

438.43 EUR

1 day

+0.10%

YTD

-9.01%

Date

2025-04-25

Sustainability

Article 9

NAV

232.30 SEK

1 day

+1.09%

YTD

-12.77%

Date

2025-04-25

Sustainability

Article 9

NAV

137.03 USD

1 day

-0.09%

YTD

-0.73%

Date

2025-04-25

Sustainability

Article 9

NAV

111.08 CZK

1 day

+0.03%

YTD

-9.91%

Date

2025-04-25

Sustainability

Article 9

NAV

133.74 EUR

1 day

+0.10%

YTD

-8.90%

Date

2025-04-25

Sustainability

Article 9

East Capital Global Emerging Markets Sustainable is a high conviction fund of around 50 companies operating in emerging markets.

The investment process emphasises an “on-the-ground” approach to select high quality but reasonably valued companies that offer structural growth throughout the economic cycle. This results in a strong mid and small-cap bias and a high active share, typically above 80%.

Aware that stock returns are driven by much more than company quality, the team considers top-down drivers and makes a conscious and deliberate effort to remove the effects of cognitive and behavioural bias at each step of the investment process. ESG analysis is a key part of the research process, and is done by the investment team using proprietary tools in order to better understand the risks and opportunities of investee companies.

Jacob Grapengiesser, Chief Investment Officer and Partner, leads the Global Emerging Markets investment team. The core portfolio manager team has worked at East Capital for an average of 14 years. Most of the team are based in Hong Kong in order to be close to the key markets.

Q1 was a strong quarter for emerging markets, returning 2.7%, significantly outperforming the S&P 500, which declined by 4%, marking the worst quarter for US markets relative to the rest of the world since 2002. However, after the quarter ended we saw Trump’s “Liberation Day” tariff announcements, with the S&P 500 falling 11% in the two days that followed, and Hong Kong’s Hang Seng Index having its worst day since the 1997 Asian crisis on Monday 7 April, closing down 13.2%.

Focusing on Q1, China was the standout performer in Q1, returning 15%. This was catalysed by the release of DeepSeek in January, followed by further AI models from listed Chinese companies such as Alibaba. The latest DeepSeek and Alibaba models are, respectively, ranked first and third globally among all well-known large language models (LLMs) in the Hugging Face LLM rankings, which assess LLM reasoning abilities using various benchmarks. Much attention has been given to the cost of these models; while actual costs may be slightly higher than reported, it is clear that they are significantly cheaper than the AI models developed in the US. We rotated our portfolio into the tech sector and increased our position in names like Alibaba, subsequently returning 57%.

Meanwhile, BYD launched its ‘God’s Eye’ self-driving technology, which is available on a range of vehicles, including the USD 10,000 Seagull model. Tesla charges USD 8,000 for its self-driving feature alone, and with significantly higher vehicle prices. The stock, which was one of our largest alpha generators in the period, returned 47% as investors appreciated the strength of the company’s offering.  It’s important to mention that BYD doesn’t sell cars to the US, and therefore, the direct impact of the tariffs is limited.

For China’s market rally to broaden, economic conditions remain crucial. After spending the past few weeks meeting companies in Hong Kong, we found a degree of cautious optimism, with companies showing signs of improvement in Q1. Key indicators, such as housing prices, appear to be stabilising rather than declining month on month. We therefore continue to see significant value in China, provided the government continues its gradual stimulus measures, as we expect. Towards the end of the quarter, we took some profits from the tech holdings and rotated into high-quality non-tech companies with strong growth but trading at attractive valuations. 

Elsewhere in emerging markets, performance was more muted, with two other large markets, Taiwan and India, returning -13% and -3%, respectively. We visited Taiwan, including TSMC’s headquarters during the quarter. Our view remains that the AI hype was largely priced in by late 2024 and recent negative sentiment from the emergence of DeepSeek and a broader Nasdaq sell-off has impacted Taiwan. That said, we see significant value beyond tech hardware (e.g. auto parts), and have generated 37bps of alpha in Taiwan from these non-tech stock picks.

India had a volatile quarter, with the MSCI India down -11% at one point before recovering to  3%. The key driver of the sell-off was strong outflows from international investors rotating into China, compounded by concerns about a cyclical slowdown and weak earnings. Since November of last year, we have been significantly reducing our exposure to mid and small caps (by 7% of the fund). However, the exposures that we had sold off aggressively, which drove approximately 1.9% of negative alpha, down from over 5% of positive alpha in 2024. We now have very little exposure to mid and small caps and are selectively adding high-quality names with strong earnings visibility at attractive prices as the market appears to be bottoming out.

It has been a busy period for travel, with our team visiting the Philippines, Sri Lanka, Taiwan, India, China and Hong Kong. These trips provide not only opportunities to meet promising companies but also valuable insights from other market participants and stakeholders, helping us understand broader market drivers beyond company fundamentals.

On the sustainability front, we published our H2 Impact Report for the fund. A key highlight is that 85% of our portfolio companies now report Scope 1 and 2 emissions, a significant improvement from 35% in 2020. We think numbers like these go a long way to addressing the many questions we receive about the availability of sustainability data in emerging markets. This progress reflects both investor engagement from managers like us and regulatory changes, such as India’s mandate requiring all companies to disclose emissions. 

Trump's "Liberation Day" announcement, which came after the quarter end, was in many ways the worst-case scenario. The US imposed a baseline tariff of 10% on all countries (excluding certain goods such as semiconductors and certain countries such as Mexico) and much higher tariffs on certain key trading partners. The market has been in a bit of a freefall since then, especially after China announced its willingness to retaliate by increasing tariffs on US goods and opening up investigations into US companies operating in China. 

The big question going forward is the extent to which Trump is willing to negotiate. As is often the case with his administration, the messaging has been mixed, and he has occasionally indicated that there would be room to reduce tariffs, for example with China if they would agree to the sale of a majority stake in US TikTok to a consortium of US investors.

We are keeping a level head, trimming certain positions where we feel the risk-reward no longer looks appealing, while of course being on the lookout for stocks that we believe have sold off excessively.  

In contrast to the US, investor positioning in emerging and frontier markets remains light, particularly among US investors, who control the majority of global AUM. Moreover, not all markets are hit evenly – for example Goldman Sachs estimates that India’s GDP would be reduced by just 30bps, but this would be offset by lower oil prices (10bps) and lower interest rates (10bps).

If the tariff situation takes a positive turn, it wouldn’t be unreasonable to expect that emerging and frontier markets could continue their outperformance. The tit-for-tat taking place between the US and China at the time we are writing this commentary is indeed worrying and we, along with the rest of the world, will be watching closely.  

Our portfolio trades at 10.0x PE 2025 compared with 11.5x for the benchmark, whilst offering superior earnings growth of 19.7% versus 11.6% for the benchmark. 

 

Performance in USD net of fees.

This publication is not directed at you if we are prohibited by any law in any jurisdiction from making this information available to you and is not intended for any use that would be contrary to local laws or regulations. Every effort has been made to ensure the accuracy of the information in this document, but it may be based on unaudited or unverified figures or sources. The information in this document should not be used as the sole basis for an investment. Please read the Prospectus and the KID, which are available on the fund page.

East Capital Global Emerging Markets Sustainable is an Article 9 fund under the EU Sustainable Finance Disclosure Regulation (SFDR) which means that we are explicitly looking to invest in companies that have a positive impact on the world around them in addition to outperforming the market.

The key proprietary tool developed to assess this has been highlighted on various occasions by the PRI - UN Principles for Responsible Investment. The implications of this approach are that the fund:

  • Doesn’t invest in fossil fuel companies and most mining companies
  • Has a strong quality bias
  • Aims to identify the future “ESG darlings” of the market before the ratings agencies and international banks 

You can find key documents explaining the sustainability process and outcomes in the "Sustainability" section.

East Capital Global Emerging Markets Sustainable Presentation Video

Why invest in Emerging Markets?

Watch as Jacob Grapengiesser (CIO) and David Nicholls (Portfolio Manager) present the fund East Capital Global Emerging Markets Sustainable.

Geographical Split

Sector Allocation

Largest Holdings

Fund facts

Fund

East Capital Global Emerging Markets Sustainable A EUR

ISIN

LU0212839673

Launch date

2005-05-09

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.96%

Management fee

1.50%

Benchmark

MSCI Emerging Markets (dividend adjusted index)

Fund

East Capital Global Emerging Markets Sustainable A SEK

ISIN

LU0562934264

Launch date

2010-12-01

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.96%

Management fee

1.50%

Benchmark

MSCI Emerging Markets (dividend adjusted index)

Fund

East Capital Global Emerging Markets Sustainable A USD

ISIN

LU1758601261

Launch date

2019-03-12

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.95%

Management fee

1.50%

Benchmark

MSCI Emerging Markets (dividend adjusted index)

Fund

East Capital Global Emerging Markets Sustainable A CZK

ISIN

LU2223384681

Launch date

2020-10-05

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.96%

Management fee

1.50%

Benchmark

MSCI Emerging Markets (dividend adjusted index)

Fund

East Capital Global Emerging Markets Sustainable R EUR

ISIN

LU0864106058

Launch date

2019-10-25

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.60%

Management fee

1.10%

Benchmark

MSCI Emerging Markets (dividend adjusted index)

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More information

Reporting of the fund's historical returns does not consider inflation.

Past performance of East Capital Global Emerging Markets Sustainable prior to 9 January 2019 relates to East Capital Emerging Asia, which from 9 January 2019 was reorganised with a new objective and investment policy. East Capital China Environmental merged into Global Emerging Markets Sustainable on 25 October 2019.

2022-04-01

The merger of the Funds East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe with East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe (respectively) has been carried out in accordance with the submitted merger plan, which was approved by Finansinspektionen (the Swedish Financial Supervisory Authority) on 15 February 2022.

East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe thus ended on 1 April 2022.

Following the merger, former shareholders in East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe now own shares in East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe.

More information about the merger, such as the auditor's opinion on the exchange relationship, can be obtained from the management company East Capital Asset Management S.A. upon request.

Investing through a financial intermediary may impact the investor’s rights to compensation in the event that compensation is paid due to errors or non-compliance.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by East Capital. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.mscibarra.com)