The attraction of small caps in emerging markets

EMERGING markets remain at the forefront of the world's most vibrant and fastest-growing economies, with overall GDP (gross domestic product) growth rates comfortably in excess of the developed world, despite much publicised slowdowns in certain countries.

We believe the challenges faced by certain countries, sectors and companies - such as energy firms and Chinese banks - have both obscured interesting opportunities within the emerging-market space and highlighted the necessity of active management in seeking investment returns.

Specifically, we believe small-capitalisation stocks within emerging markets ("EM small caps", market capitalisation under US$2 billion) offer continued strong growth at attractive valuations, and as an asset class is overlooked by most investors - in part due to misconceptions regarding the volatility, liquidity and scale of this investment universe.