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https://www.vaneck.com/blogs/emerging-markets-equity/emerging-markets-equity-understanding-the-financials-exposure/

Van Eck Global

2020-06-29 15:20:04, Angus Shillington, Deputy Portfolio Manager, VanEck

Content Categorization
/Finance/Investing

Word Count:
800

Words/Sentence:
33

Reading Time:
8.00 min

Reading Quality:
Advanced

Readability:
16th or higher

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This write-up aims to explain why the financial companies that we own are more exciting than the large index weights.

Evolution of the Financials Sector

In the past, emerging market financials were predominantly comprised of large SOEs that were regulated by governments.

The VanEck Emerging Markets Equity Strategy is a structural growth portfolio that tends not to invest in value-driven, cyclical, large cap names – many of which happen to be state-owned enterprises ("SOEs").

Today, the MSCI Emerging Markets Index's Financials sector is diversified – it is still dominated by Banks but also includes Insurance companies, Consumer Finance, Capital Markets and other financials issuers, as outlined below.

Source: Bloomberg, FactSet.

Diversified Financials also include Industrial Conglomerates and Thrifts & Mortgage Finance.

Our Approach to Financials

We, however, primarily focus on Micro Finance, Insurance and high quality Consumer Banks (please see the chart below).

We buy and hold high conviction names in this space because we believe that these investment opportunities represent visible and persistent growth that will survive and thrive in a rapidly changing asset class.

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