Unveiling the Midas Touch: How Aubrey Capital Dominates Emerging Markets
The Power of Consumer Obsession
In the intricate world of high finance, where countless investors chase lucrative returns, Aubrey Capital stands out as a true maestro. The secret to their remarkable success? An unwavering focus on one pivotal force shaping the emerging markets landscape: the consumer.
“We’re laser-focused on the consumer,” declares Mark Martyrossian, a director and head of distribution at Aubrey Capital. This singular belief has catapulted the Aubrey Global Emerging Markets Opportunities Fund to the top of the charts, delivering an impressive 13.8% return over the past year, eclipsing the 8.2% gain of the MSCI Emerging Market Index.
Unveiling the Global Emerging Markets Strategy
Aubrey’s investment compass is guided by its Global Emerging Markets Strategy, an astute lens through which it assesses nearly 0 million of assets. For a company to earn a place in Aubrey’s portfolio, it must meet a crucial criterion: deriving the bulk of its revenue or profit directly from consumers.
Out of a sprawling universe of approximately 2,000 consumer-facing companies in emerging markets, Aubrey strategically selects only around 35 for its portfolio. This discerning approach ensures that the fund is heavily invested in companies that are tethered to the pulse of the consuming public.
Navigating the Macro Landscape
While Aubrey prides itself as a “bottom-up investor,” meticulously scrutinizing the fundamentals of individual stocks, it doesn’t neglect the larger macro picture. Avoiding countries plagued by economic woes, such as Turkey and South Africa, where consumer spending may suffer, is a cornerstone of the Aubrey approach.
Turkey’s economic struggles, driven by skyrocketing inflation approaching 70%, serve as a cautionary tale. In response, the country’s central bank has implemented a drastic interest rate hike to combat inflation, a move that typically squeezes consumers’ budgets.
“When an economy stumbles, consumers become more hesitant to spend,” explains Martyrossian. “A struggling economy dissuades people from making discretionary purchases.”
Artificial Intelligence: A Missed Opportunity?
Aubrey’s consumer-centric strategy has also led it to miss out on the meteoric rise of artificial intelligence (AI) over the past 18 months. The fund’s portfolio lacks notable investments in AI chipmakers like Taiwan’s TSMC, despite the latter’s impressive 60% rally over the past year.
“TSMC is undoubtedly a world-class performer,” acknowledges Martyrossian. “But they’re primarily involved in semiconductor foundry services, which is a business-to-business operation. Our focus remains on businesses that directly engage with consumers.”
Betting on India: A Future-Oriented Move
A significant portion of the Aubrey Global Emerging Markets Opportunities Fund, nearly half, is invested in companies based in India. Martyrossian believes that future earnings potential justifies current valuations, even though the Indian stock market has repeatedly hit all-time highs this year.
“The Indian market appears overbought at first glance,” explains Martyrossian. “However, our analysis indicates a steady stream of profits on the horizon, which makes today’s prices quite palatable.”
One of Aubrey’s top holdings in India is Varun Beverages, a leading bottler of PepsiCo beverages outside the United States. Varun’s stock has surged by over 1,000% in the past five years, and despite some adjustments to stay within risk parameters, it remains a cornerstone of Aubrey’s portfolio.
“For many people globally, enjoying a soft drink is synonymous with affluence,” says Martyrossian. “This makes soft drinks a compelling investment theme for us.”
Aubrey’s Indian portfolio also includes other major players in the beverage and fast-food industries, including Coca-Cola FEMSA, Arca Continental, Alesa, and Arcos Dorados.
Real Estate: A Growth Story Inspired by China
Approximately 7% of the fund is invested in Indian real estate developers such as Macrotech and DLF, which cater to the rapidly expanding middle class in urban areas. Both companies specialize in luxury residential complexes and township projects around major metropolitan hubs like Delhi and Mumbai.
Martyrossian draws parallels to China, where the urban population has witnessed remarkable growth from 35% to 60% since 2000. While India’s urban population growth has been less dramatic, at 18% since 1960, the trend has accelerated recently.
“Investing in the real estate sector is a long-term play that we’re keeping a close eye on,” says Martyrossian. ” India has the potential to follow a similar urban growth trajectory as China, creating opportunities for developers who meet the demand.”
Conclusion: A Consumer-Centric Path to Stellar Returns
Aubrey Capital’s unwavering focus on consumer spending has been the driving force behind its stellar performance in emerging markets. By meticulously selecting companies that are integral to consumers’ lives and carefully navigating the macroeconomic landscape, Aubrey has consistently outperformed its peers.
As the emerging markets continue to evolve, Aubrey’s commitment to understanding and investing in consumer trends will undoubtedly continue to reap rewards.
Data sourced from: cnbc.com
