In This Article:
Investing in emerging markets takes time, and to do it successfully one almost must ignore what's happening in U.S. markets.
The dynamics are just different, and the U.S. market has been on a tear since the presidential election.
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Just ask Arjun Jayaraman, director of quantitative research at Causeway Capital Management in Los Angeles and one of four managers of the firm's Emerging Markets fund.
TheStreet-Causeway Capital Management
The fund, which has about $2.1 billion in assets, also has six quantitative-oriented investing specialists to support the managers.
Causeway's goal is to beat the MSCI Emerging Markets Index. The index is just that: It tracks 1,278 large-cap and midcap stocks domiciled in some 24 countries.
The fund has succeeded both in the investor class fund (CEMVX) and its institutional class (CEMIX) .
The funds are up about 18.4% so far in 2024 and have risen more than 30% over the past 12 months. The MSCI index is up 11.7% this year.
(The difference is the minimum investment required: $5,000 for investor and $1 million for institutions. This article will focus on the investor fund.)
But emerging markets investing can be a volatile business. There are country risks to consider as well as the nuts and bolts of a company's business and those of its competitors.
The investor fund fell 23% in 2022, but that was a terrible year for stocks generally. Another bad year: 2018, a year dominated by U.S.-China trade tensions. The fund fell 18%.
Causeway's Emerging Markets portfolio currently has about 181 stocks domiciled in 21 countries.
TheStreet.com interviewed Jayaraman as part of our Expert Interview series.
TheStreet: What's your outlook for stocks in the U.S.?
Jayaraman: We're mostly in a sweet spot domestically because interest rates generally have been falling. The Federal Reserve is now cutting rates. The dollar is lower, and the yield curve has shifted lower.
TheStreet: How optimistic are you about Emerging Markets?
Jarayaman: We do have concerns about what the incoming Trump administration might do with tariffs. Companies in emerging-market countries are very export-oriented, and high tariffs would hurt their businesses. It's a serious concern.
The Street: Describe how the fund invests.
Jayaraman: We use quantitative analysis with a fundamental layover. That means we emphasize all of the financial data for a company including earnings, price/earnings ratio, cash flow, dividends and whether a company is buying back shares. Then we look at the fundamentals of the country. Is the country stable? Are the laws and regulations applied evenly and predictably. We do that for each individual stock.