Emerging Markets: The Growth, the Value & the Quality
Emerging Markets (EM) have long been characterised as a universe filled with substantial growth opportunities, yet often clouded by volatility and inefficiency. Investors pursuing attractive returns must adeptly navigate diverse market conditions, identifying hidden value, leveraging sustainable growth, and ensuring high-quality investments to manage risk effectively. At RAM AI, our systematic bottom-up process, enhanced by advanced AI-based return prediction models, offers precisely this sophisticated blend.
Our RAM Emerging Markets Equities fund has established a solid risk-adjusted track record since its launch in 2009 under the UCITS framework, combining Growth/Momentum, Value Cash Flow, and Quality/Low Risk strategies. By assessing more than 500 unique alpha signals—including fundamental metrics, investor sentiment, flow and positioning indicators, and comprehensive risk measures—our models meticulously predict individual stock returns and aim to optimise each trade for alpha generation and risk mitigation.
The Growth: Riding the AI Wave in Asia
Today, our growth exposure prominently features leaders in the rapidly expanding artificial intelligence (AI) space, particularly within the dynamic Asian markets. China and Taiwan stand out as major hubs driving this transformative innovation.
In China, tech giants Tencent and Alibaba are at the forefront, leveraging powerful AI-driven ecosystems. Tencent continues to expand its dominance in social media, fintech, gaming, and cloud services—sectors inherently enriched by AI technologies that boost user engagement and operational efficiencies. Meanwhile, Alibaba capitalises on AI through its significant investments in cloud infrastructure, logistics, e-commerce and increasingly sophisticated customer analytics. Complementing these giants, top Chinese communication service providers amplify our exposure to this theme, offering robust growth driven by digitalisation and 5G expansion.
Taiwan further enhances our growth strategy, particularly through semiconductor powerhouses such as TSMC and MediaTek. TSMC remains integral to the global technology supply chain, riding high demand driven by AI applications, data centres, and consumer electronics. MediaTek, equally crucial, benefits from the surge in demand for AI-enabled chipsets, powering everything from smartphones to smart home devices. These Taiwanese leaders solidify the fund's strategic positioning to capitalise on the sustained technology growth cycle.
The Value: LatAm’s Rate-driven Opportunities
While the Growth segment thrives on innovation, our Value strategy pivots to Latin America, a region currently marked by high interest rates and historically low valuations—particularly in mid-cap stocks. Such environments traditionally present significant upside potential as interest rates inevitably normalise.
Latin America's equity markets, recently overlooked by global investors due to macroeconomic volatility, now present compelling valuations. As central banks across the region approach the turning point in monetary policy, a significant re-rating of stocks is likely. Our systematic approach identifies undervalued companies with robust cash flow characteristics poised for meaningful gains once the interest rate cycle reverses.
Our focus extends beyond large, commonly tracked stocks, delving into less-followed mid-cap names where inefficiencies and mispricing often persist. These hidden gems offer higher return potential when market sentiment shifts positively, propelled by improving macroeconomic fundamentals, renewed investor confidence, and eventual lower borrowing costs. By capturing these opportunities early, our systematic strategy positions investors to capitalise significantly on the forthcoming valuation recovery.
The Quality: Stability Through Consumer & Healthcare
Our Quality/Low Risk component anchors the portfolio with companies demonstrating consistent performance, stable cash flows and resilience to macroeconomic shocks. In particular, we emphasise Consumer Staples and Healthcare sectors, benefitting from structural, secular growth trends linked to expanding middle-class demographics across EM countries.
Consumer staples in EM regions enjoy predictable demand, reflecting increased household incomes and steady consumer spending, irrespective of economic cycles. Our portfolio includes select companies displaying strong brand equity, reliable cash flow generation, and disciplined capital management, minimising volatility while maximising investor returns.
Healthcare, similarly, remains a strategic cornerstone due to sustained growth drivers such as ageing populations, increased healthcare accessibility and rising spending power in EM middle-class communities. Companies in this space offer stable revenue streams, durable competitive advantages, and robust balance sheets, making them ideal low-risk, high-quality investments.
Blending Strategies: Optimal Diversification, Enhanced Returns
The synergy between Growth, Value, and Quality components aims to enhance the overall risk-return profile of the RAM Emerging Markets Equities fund. By integrating AI-based predictive analytics to scrutinise each investment opportunity at a granular level, we precisely tailor our stock selection to focus on optimising alpha generation while effectively managing risk.
Moreover, diversification is a critical feature of our fund. With exposure to over 500 carefully selected stocks, our strategy avoids structural biases towards any specific country, sector, or company size. This diversification enables investors to access broader opportunities across the EM universe—from overlooked mid-cap stocks ripe for revaluation to leading large-cap firms spearheading technological innovation and stable companies underpinning long-term portfolio stability.
Conclusion: An Attractive EM Investment Proposition
The RAM Emerging Markets Equities fund encapsulates the essence of disciplined, data-driven investing enhanced by cutting-edge AI analytics. Our comprehensive approach to systematically blending Growth, Value, and Quality strategies enables us to capitalise on the diverse opportunities EM currently present:
- Growth: Accessing transformative trends through AI leaders in China and Taiwan.
- Value: Benefitting from LatAm’s impending rate-driven market normalisation.
- Quality: Ensuring stability through secular, long-term consumer and healthcare investments.
As EM continue to offer compelling investment potential, the systematic, AI-enhanced approach of the RAM Emerging Markets Equities fund provides investors an optimal blend of Growth, Value, and Quality— aiming to deliver attractive, risk-adjusted returns amidst the complexities and opportunities inherent in the EM universe.
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The fund is a Sub-Fund of a Luxembourg SICAV with registered office: 14, Boulevard Royal L-2449 Luxembourg, approved by the CSSF and constituting a UCITS (Directive 2009/65/EC). This marketing document is only provided for information purposes to professional clients, and it does not constitute an offer, investment advice or a solicitation to subscribe shares in any jurisdiction where such an offer or solicitation would not be authorised or would be unlawful. In particular, the Fund is not offered for sale in the United States or its territories and possessions, nor to any US Person (citizens or residents of the United States of America). The information and opinions contained in this document were obtained from reliable sources at the time of publication. Note to investors domiciled in Singapore: shares of the Sub-Fund offered in Singapore are restricted schemes under the Sixth Schedule to the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations of Singapore. This document is confidential and is intended only for the use of the person to whom it was delivered; it may not be reproduced or distributed. There is no guarantee that the holdings shown will be held in the future. The investment described concerns the acquisition of shares in the Sub-Fund and not in a specific underlying asset. Past performance is not a guide to current or future results. There is no guarantee to get back the full amount invested. The performance data do not take into account fees and expenses charged on subscription and redemption of shares nor any taxes that may be levied. As a subscription fee calculation example, if an investor invests EUR 1000 in a fund with a subscription fee of 5%, the investor will pay EUR 47.62 on the investment amount to the intermediary, resulting in a subscribed amount of EUR 952.38 in fund shares. In addition, potential account-keeping costs (charged by the investor’s custodian) may reduce the performance. Some shares in the Sub-Fund may apply a performance fee. Please refer to the section “Charges” and to the “Glossary” in this document for further details. Leverage intensifies the risk of potential increased losses or returns. RAM Active Investments may decide to terminate the marketing arrangement in place in any given country in accordance with Article 93a of Directive 2009/65/EC. Changes in exchange rates may cause the NAV per share in the investor’s base currency to fluctuate. Particular attention is paid to the contents of this document, but no guarantee, warranty or representation, express or implied, is given as to its accuracy, correctness or completeness. Prior to any transaction, clients should check whether it is suited to their personal situation and analyze the specific risks incurred, especially financial, legal, and tax risks, and consult professional advisers if necessary. Please refer to the Key Investor Document and the prospectus, with special attention to the risk warnings, before investing. For further information on ESG, please refer to https://www.ram-ai.com/en/regulatory-information and the relevant Sub-Fund webpage under “Sustainability related disclosures." The prospectus, constitutive documents, and financial reports are available in English and French, while KIDs are available in the relevant local languages. These documents can be obtained free of charge from the SICAVs’ and Management Company’s head office and from www.ram-ai.com, its representative and distributor in Switzerland, RAM Active Investments S.A. For local information (similarly to what is provided for Austrian investors), documents are available on www.ram-ai.com or from Mediobanca Management Company S.A., 2 boulevard de la foire 1528, Grand-Duché de Luxembourg. A summary of Investors’ rights is available on: https://www.mediobancamanagementcompany.com/en. Issued in Switzerland by RAM Active Investments S.A., which is authorized and regulated in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA). Issued in the European Union and the EEA by the authorized and regulated Management Company, Mediobanca Management Company S.A., 2 boulevard de la foire 1528, Grand-Duché de Luxembourg. The source of the above-mentioned information (except if stated otherwise) is RAM Active Investments, and the date of reference is the date of this document.
Glossary
Volatility: A measure of how much an investment’s returns can vary over time. Higher volatility means larger price swings—both up and down—which typically indicates higher risk.
Sharpe Ratio: A risk-adjusted return metric that compares a fund’s excess return (above the risk-free rate) to its volatility. A higher Sharpe Ratio suggests better return per unit of risk taken.
Alpha: A measure of a fund’s excess return relative to its benchmark. Positive alpha means the fund outperformed the benchmark after adjusting for market risk, reflecting manager skill.
Beta: A measure of a fund’s sensitivity to market movements. A beta of 1 means the fund moves in line with the market; below 1 indicates lower sensitivity, while above 1 indicates higher sensitivity.
Upside Capture Ratio: Shows how well a fund captures gains when the market is rising. A ratio above 1 means the fund outperforms the market during up periods.
Downside Capture Ratio: Shows how much of the market’s losses a fund experiences when markets decline. A ratio below 1 means the fund loses less than the market during down periods—a key indicator of defensive strength.
Inefficiencies: Persistent mispricings in the market where stock prices deviate from their fundamental value. The Fund seeks to exploit these inefficiencies systematically across a broad universe of Emerging Markets equities.
Artificial Intelligence (AI): Advanced algorithms based on AI used by the Fund to process large amounts of data, identify patterns, and optimise portfolio construction.
Growth / Momentum: Growth refers to stocks of companies expected to grow earnings or revenue faster than the market average. Momentum refers to stocks with strong recent performance, assuming trends may persist for a period.
Value / Cash Flow: Value investing focuses on undervalued stocks based on fundamental indicators like low price-to-earnings or price-to-cash-flow ratios.
Quality / Low Risk: Stocks of companies with stable earnings, strong balance sheets, and consistent profitability.
Mid-Cap: Companies with medium-sized market capitalisations.
Large-Cap: Companies with large market capitalisations.
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