South Africa3.6% Information Technology30.4% Financials28.4% Consumer Discretionary9.6% Consumer Staples6.1% Energy5.4% Telecommunication Services5.3% Real Estate3.4% Materials3.3% Health Care2.3% Industrials1.2% Cash and Cash Equivalents4.6% Banks22.1% Software & Services18.7% Consumer Services7.8% Technology Hardware & Equipment6.6% Energy5.4% Telecommunication Services5.3% Semiconductors & Equipment5.1% Insurance4.9% Food, Beverage & Tobacco4.7% Real Estate3.4%
|% OF PORTFOLIO|
|Tencent Holdings Ltd.||6.0%|
|Alibaba Group Holding Ltd. ADR||5.7%|
|Samsung Electronics Co. Ltd.||4.6%|
|ICICI Bank Ltd. ADR||3.4%|
|Baidu, Inc. ADR||2.9%|
|HDFC Bank Ltd.||2.9%|
|AIA Group Ltd.||2.6%|
Tencent is a leading Chinese Internet company offering an instant messaging service, a social networking site, a news/entertainment portal, and an online gaming platform. In the gaming division, Tencent is a leading provider of both casual games and massively multiplayer online games (MMOG) and utilizes in-house development and third party licensing. Its key asset is its large instant messaging user base, which allows it to cross sell and monetize other services.
Even with a relatively low level of Internet penetration, China already boasts the world's largest online population. The number of Chinese people accessing the Internet should continue to increase as physical telecommunication infrastructure is built out and as more individuals are able to afford PCs. Tencent, which already has more than 500 million active users, will benefit from increasing internet penetration to the extent it can continue to monetize its massive user base. Today Tencent derives revenue from premium instant messaging services, online advertisements, wireless messaging, and online gaming. Notably, it has become a key online gaming player in a relatively short period of time.
Barriers to entry in the Internet space are relatively low given low capital intensity, and the rapid pace of technological innovation can make the competitive environment quite dynamic. Tencent's famous "QQ" brand, user base, significant net cash balance sheet, and substantial free cash generation are key competitive advantages which may be leveraged to grow both organically and inorganically.
Alibaba Group was the largest online and mobile commerce company in the world by gross merchandise volume in 2013. Alibaba operates platforms for third parties and does not engage in direct sales or hold inventory. Alibaba Group started as an online B2B marketplace platform, alibaba.com, in 1999. In 2003, it launched an online C2C marketplace platform, Taobao. In 2008, it launched an online B2C marketplace platform, Tmall.
Taobao currently has 85% market share in China C2C ecommerce market. Tmall has 55% market share in China B2C ecommerce market. We believe Alibaba Group is a beneficiary of 1) growth in China consumption, and 2) increasing penetration of online retail to offline retail.
ICICI Bank Ltd. is engaged in providing a wide range of banking and financial services, which includes commercial banking and treasury operations to corporate and retail customers through a variety of delivery channels. Through its specialized subsidiaries in the areas of commercial banking, retail banking, life and non-life insurance, project and corporate finance, working capital finance, venture capital and private equity, investment banking, asset management, broking and treasury products and services.
The company operates through four segments: Retail Banking, Wholesale Banking, Treasury and Other Banking. The Retail Banking segment includes exposures of the bank, which satisfy the four qualifying criteria of regulatory retail portfolio as stipulated by the RBI guidelines on the Basel II framework. The Wholesale Banking segment includes all advances to trusts, partnership firms, companies and statutory bodies, by the bank which are not included in the Retail Banking segment, as per the RBI guidelines for the bank. The Treasury segment includes the entire investment portfolio of the bank. The Other Banking segment includes leasing operations and other items not attributable to any particular business segment of the bank. ICICI Bank was founded on January 5, 1994 and is headquartered in Mumbai, India.
Source - Factset
Sanlam Ltd. provides financial solutions to individual and institutional clients. Its solutions include individual, group and short-term insurance, personal financial services such as estate planning, trusts, wills, personal loans, health management, savings and linked products. The company operates through five segments: Sanlam Personal Finance, Sanlam Emerging Markets, Sanlam Investments, Santam and Corporate & Other. It also offers business fitness assessment and insurance investment management, asset management, employee benefits, risk management and capital market activities. Sanlam was founded on June 8, 1918 and is headquartered in Bellville, South Africa.
Baidu is the leading internet search engine in China. As with Google, advertisers bid on Baidu-generated "key words." Baidu is paid a fee when one uses its search function, clicks on a key word, and moves to the advertiser's website. The company has nearly 80% market share of Chinese search, making it more dominant than Google is in the United States.
As online penetration increases, advertisers should begin to switch their advertising spending from more traditional media (ie TV, newspaper) to online mediums (ie internet search, video). The average Chinese person spends roughly 3x of his or her personal time using the internet versus watching TV. Despite this dynamic, 60% of China's advertising budgets are spent on TV, 6x those that target the internet. As the proportion of advertising spend adjusts to time spent on various media activities, online advertising spending should begin to take share.
As social networking websites like Facebook and Twitter become more prevalent, concerns arise over whether these platforms can become a popular method for advertising, diverting business from Baidu. However, the effectiveness and return on investment of the search medium is well-documented, while the newer social advertising business models are still young and unproven.
HDFC Bank Ltd. engages in providing a wide range of banking and financial services, including commercial banking and treasury operations. It provides financial services to upper and middle income individuals and corporations in India. The company has two subsidiaries: HDFC Securities Ltd. and HDB Financial Services Ltd. HDFC Securities is primarily engaged in the business of providing brokerage services through the Internet and other channels with a focus to emerge as a full-fledged financial services provider. HDB Financial Services Ltd. is a non-deposit taking non-bank finance company typically underserviced by the larger commercial banks. The bank operates its business through four segments: Treasury, Retail Banking, Wholesale Banking and Other Banking Business. The Treasury segment consists of net interest earnings from the Bank's investment portfolio, money market borrowing and lending, gains or losses on investment operations and on account of trading in foreign exchange and derivative contracts. The Retail Banking segment serves retail customers through a branch network and other delivery channels. It raises deposits from customers and makes loans and provides advisory services to customers. The Wholesale Banking segment provides loans, non-fund facilities and transaction services to large corporates, emerging corporates, public sector units, government bodies, financial institutions and medium scale enterprises. The Other banking business segment includes income from para banking activities such as credit cards, debit cards, third party product distribution, primary dealership business and the associated costs. The company was founded in August 1994 and is headquartered in Mumbai, India.
Source – FactSet
Cielo SA engages in the provision of merchant, payment processing, and credit and debit card services. It includes capturing and processing of transactions with credit and debit cards, other means of payment and accreditation of merchants. The company was founded on November 23, 1995 and is headquartered in Barueri, Brazil.
AIA Group Ltd. is the largest independent, publicly listed pan-Asian life insurance group in the world. It has wholly-owned main operating subsidiaries or branches in 14 markets in Asia-Pacific and a joint venture in India. AIA meets the savings and protection needs of individuals by offering a range of products and services including retirement planning, life insurance, and accident and health insurance.
Estimates suggest that the life insurance gap in Asia is ~$30-35T and twice that amount when one considers health insurance, accident insurance, etc. AIA has the ability to sell its products into this large unmet need and provide consumers with a social safety net.
AIA was previously owned by AIG. During the financial crisis, the business became distracted by the issues at AIG. Now as an independent, public company, AIA has the ability to improve its margins and return profile. Additionally, the business is in a net cash position and can deploy it excess capital to improve returns.
|Portfolio P/E Trailing 12 Months*||18.7x|
|Portfolio Price to Cash Flow*||10.6x|
|Portfolio Price to Book*||2.6x|
|Median Market Capitalization*||$40.8 B|
|Number of Holdings||47|
|7-Year Beta* (A shares vs. MSCI Emerging Markets Index)||0.84|
|Emerging Markets Exposure||76.9%|
|Active Share* (vs. MSCI Emerging Markets Index)||77.1%|Basic Value44.8% Consistent Earners36.7% Emerging Franchises13.9% Cash & Cash Equivalents4.6% Large Cap (> $12 B)82.5% Mid Cap ($2.5 to $12 B)16.2% Small Cap (< $2.5 B)1.2%