What is unique about WCM’s emerging markets investment process?
Trigg: For us, it’s about finding structural inefficiencies. First, we look for companies that aren’t just competing right now, but those with a strong potential to grow their competitive advantage over time. Secondly, we look for companies with cultures that are well-aligned with their long-term growth strategy. Most fundamental, bottom-up investors talk about a company’s estimated intrinsic value and buying at a discount to that estimate. You have to ask yourself, if everybody is talking about those same attributes and doing the same thing – how can you be different? How are you going to produce different results than everybody else?
Can you talk about how WCM uses “pattern recognition” in the emerging markets space?
How does WCM’s emerging markets strategy differ from the benchmark?
Is it more challenging to analyze the culture of an emerging markets firm, as opposed to an international or domestic company?
Ise: I agree. Successful cultures have similarities across all markets – chief among them being how they motivate talented people with the ability to recognize successful patterns and replicate them. And that assumes you can find those talented people, which is not always easy. In technology, for example, we know there is a massive shortage of talent globally – particularly of engineers and software developers. But the challenges around motivating people are the same whether you’re in the US, China, or Brazil. How do you motivate people to stay loyal and drive innovation? These principles are the same across all markets. And the world has changed. The standards of twenty years ago – when we all heard stories of inhumane factories and things like that – those practices aren’t acceptable anymore. Companies have to find new ways to remain relevant, stay ahead of competition, and sustain cost advantages. The moment you become complacent, things change.
How has WCM’s approach to emerging markets evolved over time?
Ise: I’d echo that, and further note that this change in emerging markets also means that we’re seeing many more EM opportunities all over the world. EM consumers and businesses see what works in developed markets and they want these same things. They recognize their time has come. The EM space, at least on a relative basis, hasn’t been in the best position in recent times – negative interest rates, a strong US dollar, geopolitical uncertainty. But I think it’s very well-positioned as an asset class. Most importantly, when you look at emerging markets versus developed markets, there are arguably more high-quality growth opportunities. And WCM approaches the space without complacency. We never assume our top EM choices are going to be the same next year as they are this year.
WCM and Natixis recently wrapped up their first year of partnership – what was the catalyst for WCM becoming a Natixis affiliate?
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