The Nomura Emerging Wealth Strategy, “NEWS” is a strategy developed to gain broad-based exposure to the wealth generation of Emerging Markets through smaller companies.
The strategy was launched in April 2011 via our pooled, Dublin-based UCITS fund: Nomura Funds Ireland Plc – Nomura Emerging Wealth Strategy (Bloomberg identifier: NOMSCIU).
Most investors in Emerging Markets miss an opportunity – there are 8,000+ stocks beyond the constituents of the MSCI EM Index, and these stocks tend to have greater exposure to the domestic consumer growth story – the reason many of our clients invest in EM to begin with.
Few investors have to date allocated to this asset class; problems of market access, liquidity and lack of investment vehicles are reasons. Yet EM Small Cap stocks have outperformed larger EM stocks despite being largely immune to the recent “hot money” inflows into large caps and ETFs. They are under-researched, and offer diversification to investors who access their potential.
The NEWS concept is based on evidence that economic wealth is not yet adequately represented in the stock markets of many countries, and our theory suggests that it is reasonable to expect this gap to narrow over time. This translates into a strategy that allocates to both countries and stocks ahead of the market, capturing “alpha” from its realisation.
NEWS generates outperformance via both a top-down approach (country weighting based on GDP adjusted by PPP – Purchasing Power Parity) and bottom-up approach (stock selection based on full market cap adjusted by sector-wide relative valuation).
Click here for the fact sheet.