FSSA Global Emerging Markets Focus fund invests in 40-45 large and medium-sized companies in emerging markets. Manager Rasmus Nemmoe has an absolute return mindset and looks for quality companies that can demonstrate sustained and predictable growth over the long term.
Previously First State Global Emerging Markets Focus.
Our opinion
From a universe of some 36,000 stocks, FSSA Global Emerging Markets Focus is a portfolio of just 40-45 best ideas. Each holding is a quality company that can show sustained and predictable growth over the long term and the fund has a strong environmental, social and governance ethos without labelling itself as such. While relatively young, the fund has already shown a lot of potential.
Company description
FSSA Investment Managers is an investment management team within First Sentier Investors, managing a range of Asia Pacific and Global Emerging Market equity strategies on behalf of clients globally. FSSA was awarded the Elite Provider for Equities rating in 2021.
First Sentier Investors is a global asset management group focused on providing high-quality, long-term investment capabilities to clients. It brings together autonomous teams of active, specialist investors who share a common commitment to responsible investment principles.
Fund manager
Rasmus Nemmoe joined FSSA Investment Managers (previous called First State) in October 2016 as a global analyst before launching FSSA Global Emerging Markets Focus fund in 2017. He previously worked at LGM in London, where he ran their Global Emerging Markets strategy. He also worked in developed and emerging market equities in his native Copenhagen. Rasmus studied at Copenhagen Business School and holds a BSc in Computer Science & Business Administration, and an MSc in Applied Economic & Finance.
Naren Gorthy joined FSSA Invesment Managers in 2014, and became co-manager of this fund in October 2019.
As is often the case, it is easier to predict what will happen than when it will happen, which is why we invest in companies with outstanding management teams and great franchises with solid long-term growth prospects.
Rasmus NemmoeFund manager
Investment process
FSSA Investment Managers has a strong house investment approach: managers look for quality companies that can show sustained and predictable growth over the long term.
Meeting firms at their premises to get an understanding of their culture is key to the investment process. As such, the team carries out around 1,500 company meetings per year. The team will also conduct extensive analysis on each company’s financial position.
Rasmus’s total universe starts with around 36,000 companies. The FSSA philosophy is that company management needs integrity and a focus on the long term. As such, managers will avoid sectors that cause direct harm to society. These will include tobacco, munitions and gambling companies. To make the cut, companies will also need a free float of at least $1.5 billion and an average daily turnover of $5 million.
From here, Rasmus will cut the universe further by assessing the quality of a firm’s franchise, management team and culture and then conducting a deep dive into the firm’s financials. Attitude towards minority shareholders and ESG issues will also be considered.
None of FSSA's funds are labelled ‘ESG’, but all have a strong ESG ethos. Managers believe society will continue to demand more from companies, so want to be on the right side of the debate.
The best ideas are placed on the watchlist. From this, a portfolio of 40-45 names is chosen based on the quality of the company, how much visibility there is in the earnings and the potential for long-term growth. Rasmus will make an investment into a stock based on a 5-10 year view of the investment case playing out. The portfolio has a hard limit of 45 stocks. At this point, Rasmus has a ‘one in one out’ process.
ESG
ESG - Integrated
FSSA takes a different approach to ESG. It believes that “sustainability is not just a label, but a set of values by which we operate”. Its approach places an emphasis on stewardship and the belief that quality managers and good governance should ensure that environmental and social concerns are rightfully addressed. To this end, the company places a real emphasis on management engagement and, by asking in-depth questions, and taking a more holistic approach, fund managers build a thorough understanding of the company, its people and its culture. They conduct around 1,500 company meetings per year and also engage with NGOs and organisations such as the WWF. FSSA has an exclusion policy, preventing managers from investing in certain obvious red-flag companies, such as those involved in tobacco, defence and gambling. Other companies that fall outside the exclusion list, but which may still be involved in activities which may not be ESG-compliant, such as a fossil fuel company which is actively transitioning to renewable energy, are heavily debated and scrutinised by the team. Managers also look at third-party ESG ratings, but only use them as one part of their research methodology, rather than as a deciding factor, given the nuances of investing in emerging markets.
Risk
To ensure the portfolio remains well-diversified and is not exposed to one particular risk, no single country weighting can be more than 30%, and frontier country weights are limited to up to 10%. No sector can be more than 40% of the portfolio, with the exception of consumer products and financials, which can be up to 50% due to the number of opportunities.
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