Raheel Altaf, Fund Manager, Artemis Fund Managers discusses the SmartGARP Global Emerging Markets Equity Fund.
What are you trying to achieve for investors, and what role could your fund play in their portfolio?
Our objective is to provide investors with broad differentiated exposure to emerging markets by systematically constructing a portfolio of companies that demonstrate strong fundamental performance, but whose share prices do not fully reflect this strength. The portfolio is typically very different from the benchmark either at a country or company level, often on a lower P/E than peer group funds and with a higher yield. This approach creates an opportunity for a "catch-up" effect, which we believe is the best way to generate attractive returns on both an absolute and relative basis over time.
To achieve this, we leverage SmartGARP®, Artemis' proprietary stock screening tool, which has been developed and refined over the past 30 years. SmartGARP systematically screens the entire emerging markets universe, identifying companies with the most attractive characteristics—strong earnings growth, positive earnings revisions, and supportive macroeconomic tailwinds—while avoiding those with high valuations, weak fundamentals, or deteriorating analyst sentiment.
The result is a portfolio distinct from its peers in sector, country, and factor positioning. The fund is currently the lowest p/e fund in its peer group, has market level quality, and is delivering a total shareholder return approaching 6%. In a world where investors are heavily concentrated in growth, we believe this fund is an attractive diversifier to portfolios as well as one that is a core emerging market holding.
What are the big opportunities and risks for your strategies in 2025?
To start with the risks, we are clearly entering a period of heightened geopolitical uncertainty under President Trump, whose transactional approach is undermining the global economic and political order that has been in place since the end of the second world war. The uncertainty around the impact of this change will undoubtedly filter into emerging markets. Fear often drives share prices in the short term as the market tries to forecast the future state of the world, which in reality is impossible to do.
However, volatility — while often considered synonymous with risk in fund management — also presents opportunities. Our process seeks to identify companies where share prices reflect excessive pessimism, even as the fundamentals signal a more positive outlook. This objective and dispassionate approach leads us to under-owned areas of the market, such as China, where the on-the-ground story is one of supportive shareholder policies, growing domestic brands, and innovation, all at discounted valuations.
Another compelling opportunity is within value stocks in emerging markets. Global investor positioning remains heavily skewed toward growth-oriented sectors, a pattern that holds across regions. Over the past three years, value stocks have outperformed in emerging markets, and we believe this trend will persist. As investors recognise this shift, we expect capital to rotate from growth into value, supporting the share prices of the types of businesses we target.
Can you identify a couple of key investment opportunities you are playing at the moment in the portfolio?
An interesting theme that is being picked up by SmartGARP is the level of maturity of emerging market economies. Previously, investors' primary reason for investing in the region was to access the GDP growth of ‘young' economies. Today, however, many emerging market companies offer attractive dividend yields, share buybacks, and debt reduction — trends typically associated with more developed markets. This shift is largely due to strong cash generation, combined with reduced international investor interest in these equities, which forces companies to deploy other measures.
Alibaba, the Chinese e-commerce business, is a great example. This was originally very much a growth story. But following the Chinese crackdown on technology companies, the business's share price suffered. With sentiment at very low levels, the company sought other ways to stimulate demand for its shares, and initiated a buyback programme as well as announcing, and paying, its first dividend. Total shareholder yield for Alibaba is close to 7%, the majority of which has been driven by the buyback programme.
We have also seen an attractive story emerge for Asian auto manufacturers, particularly in China and Korea. After a period when the market believed Tesla was the winner in electric vehicles, Kia (Korea), has emerged as a market share gainer in EVs through a combination of more attractive pricing while also encroaching on the ‘high end' space within the segment. It trades at a p/e of 3.7x, a forward dividend yield of 6.7x, and is buying back shares. Other Asian names such as BYD and Geely are experiencing similar tailwinds.
Raheel Altaf is a Fund Manager at Artemis Fund Managers
