Esemplia believes that emerging markets can display inefficiencies and the investment process is designed to extract alpha. Esemplia further believes that though shorter term, non-fundamental factors such as exuberance or investor sentiment can sometimes drive returns, these factors seldom continue. As such, the firm adopts a fundamental research based approach to emerging market equity investment management. The investment process is systematic, disciplined and repeatable; it incorporates bottom-up insights together with top-down inputs and is risk-aware. The investment process style is "core", without bias to growth or value and designed to generate excess returns under most market conditions. Currency hedging is not a part of the investment process.
The process is focussed on obtaining an information advantage from key determinants of stock prices:
- the Intrinsic Value of companies in the universe, on the basis that stock prices tend towards equilibrium around the present value of a company's future cash flows. The stock selection process is based on anticipated earnings trends and Dividend Discount Model valuation;
- a measure of Country Risk as the major portion of the discount rate used to discount forecast company cashflows. Disciplined country risk analysis focuses on future changes in country risk and valuations as opposed to reacting to current events; and
- an understanding of potential Corporate or Earnings Surprises that would cause a re-evaluation of consensus forecasts.