TEMPLETON EMERGING MARKETS IT

Investment Process

Managers Chetan Sehgal and Andrew Ness want to find stocks which are sustainable over the long term, have a competitive advantage and show resilience across different business environments. The fund also has a diversification of investment themes, with the managers seeking to identify compelling opportunities in areas from technology to corporate governance before the rest of the market does. The team starts start with an investment universe of over 750 names which is whittled down through proprietary, rigorous, bottom-up research. They look for firms with significant earnings power, evaluating economic profit based on fundamental analysis. They believe that earnings are the primary drivers of equity market returns over the long-term. They meet with over 2000 companies a year targeting those with strong cash flows, quality of assets and management and sound business models. In addition, the team incorporates economic and local currency strengths and weaknesses and any company exposure to Government and regulatory policies. When it comes to valuation, the managers want their holdings to be at a discount to their intrinsic worth. Indeed, they believe the market misprices economic value creation. The portfolio’s biggest geographical exposures are to China and South Korea.