The sustainable fund consistently outperforms its benchmark while maintaining a low-carbon intensity, with focus on finding the right people to mitigate investor risk.
The central role that corporate governance plays in investment manager Stewart Investors’ Global Emerging Markets Sustainability (GEMS) Strategy has been underscored to mark the 15th anniversary of the fund’s launch.
The firm has been investing in Asia since 1988, and emerging markets since 1992. It first launched a sustainability strategy for Asia in 2005, followed by GEMS in 2009 – both of which were driven by client demand. In addition to Asia, the GEMS strategy has invested in Europe, Africa, and Central and South America, with investors including large pension funds.
GEMS targets the generation of long-term, risk-adjusted returns by investing in the shares of high-quality companies deemed to be well-positioned to contribute to, and benefit from, sustainable development. The strategy has US$1.7 billion in AUM, while Stewart Investors’ total AUM stood at US$18.6 billion as of 31 March.
“Corporate governance was at the centre of how we invest, simply because you have to if you’re investing in emerging markets and Asia over long periods,” Jack Nelson, Portfolio Manager and GEMS Co-manager at Stewart Investors, told ESG Investor. “Our average holding period is more than five years [and] the quickest way to lose clients’ money is to invest with the wrong people in emerging markets, as you don’t have the same protections.”
As such, the firm has been prioritising investments in high-quality companies with good corporate governance, resilient cash flows and solid balance sheets, Nelson explained.
“When things go wrong in emerging markets – which they very often do – our companies tend not to decline in value as much as others,” he added. “That’s been the bedrock of our approach for 30 years.”
Beating the odds
The GEMS strategy has generated an annualised return of 10% for the 15-year period through March 2024 for Stewart Investors, consistently outperforming the MSCI Emerging Markets Index which returned 7%. It has also beaten the index in 11 of 14 full calendar years between 2010 and 2023.
GEMS is currently invested in 53 holdings across a range of different industries, with the strategy holding shares in an average 30-75 companies at a time. Stewart Investors’ global team of
