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Liontrust Emerging Markets Fund

Q4 2021 review

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Liontrust Emerging Markets Fund returned -2.5% over the fourth quarter, versus the IA Global Emerging Markets sector average and MSCI Emerging Markets Index’s respective gains of -1.9% and -1.8%*.


The final quarter of 2021 was another disappointing one for returns from emerging markets, capping off a lacklustre year overall, with the Index recording a small negative return (-1.6%) but significantly underperforming developed markets (22.9%). The robust global economic recovery following the initial Coronavirus pandemic hiatus in the first half of 2020 has led to surging inflation dynamics across both the emerging and developed worlds, in turn leading to expectations of more aggressive monetary policy tightening by the US Federal Reserve, where tightening of global liquidity conditions has historically been a difficult environment for emerging market assets. In addition, rising inflation concerns have continued to grow over global growth momentum, which has slowed somewhat. Moreover, the arrival of the extremely fast-spreading Omicron variant in November provided a further element of concern, sparking fears of a return to localised lockdowns.

In China – the largest emerging market economy by far – the market continued to perform poorly due to a combination of weaker growth dynamics, ongoing regulatory rumblings and unresolved stresses in the property market. China is also the only major economy still operating on a zero-Covid basis, thereby creating more elevated concerns over the impact of the Omicron variant on social mobility in the country. That said, the end of the year did bring a pick-up in policy actions implemented to both address the specifics of the property market weakness and also the overall question of economic weakness.

Other notably poor performers included Russia (-10.9%), where geopolitical frictions significantly increased the risk premium for the market, and Turkey (-11.9%), an ongoing victim of political meddling in the operations of the Central Bank that saw the Lira plunge through the quarter. All sectors recorded negative returns over the quarter with the sole exception of the technology sector, where improving conditions in the semiconductor segment saw a recovery in share prices. The technology hardware recovery in turn spurred on Taiwan, which ended the quarter as the best-performing major market (+7.9%).

The major positives for the Fund over the period were to be found in China and Taiwan. In the former, the Fund’s underweight position in a large underperforming market was coupled with good stock selection – in particular avoiding the under-pressure healthcare sector was a boon, and also the recovery in utility ENN Energy (under pressure in the third quarter due to rising gas prices) and automation machinery manufacturer AirTac were supportive of returns. In Taiwan, stock selection again proved helpful, this time in the technology sector, where Mediatek and Realtek Semiconductor recovered strongly along with the improved market sentiment and market pricing mentioned above.

At the other end of the spectrum, the portfolio’s relative performance was hit by the abrupt turn-around in trading performance in Russia as tensions with Ukraine rose and the threat of sanctions increased. Further to this, the newly added positions in South-East Asia (detailed below) were initially hurt by the emergence of the Omicron variant, due to concerns it would set back the exciting opening up story apparent across the region.

The biggest portfolio change in the quarter was the profit-taking in India and (to a lesser extent) Russia. As valuations became more stretched in India after that market’s significant outperformance through the year, position sizes were reduced in order to reflect lower conviction, though the individual holdings remained. The proceeds were used to fund new positions in three South-East Asian markets, namely Thailand, Indonesia and Philippines. Due to low vaccine penetration across the region social mobility has remained low throughout 2021 despite significant improvements elsewhere. However, as rates finally began to meaningfully increase towards the end of the year, the South-East Asian economies present a rare example where significant earnings recovery remains possible. One of the key attractive sectors is financials, where loan growth is now recovering and asset quality improving – positions were initiated in Bank Rakyat and Bank Mandiri in Indonesia, BDO Unibank in the Philippines and Kasikorn Bank in Thailand.

As we move into the new year, the outlook for emerging markets remains in balance between on the one hand a confluence of negative factors – including tightening global liquidity, slowing growth and the threat of Omicron – weighed up against the reality that valuations are now at extremely attractive levels – a discount to developed markets on a price-to-book basis not seen since 2002. Therefore, while the going remains challenging, in the coming months we expect an easing inflation and therefore the possibility of easing monetary policy. Given the valuations on offer, we feel that emerging markets could well be more sensitive to positive surprises across the year than the negative.

Discrete years' performance (%)**, to previous quarter-end:








Liontrust Emerging Markets C Acc GBP






MSCI Emerging Markets






IA Global Emerging Markets













*Source: FE Analytics as at 31.12.21


**Source: FE Analytics as at 31.12.21. Quartile generated on 07.01.22

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Key Risks 
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.  


This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
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