In the realm of investment, diversification is often heralded as a risk management strategy. However, for those with a keen eye on emerging markets, a different approach can yield significant rewards. Wasatch Emerging Markets Small Cap Fund follows this distinct path, charting its course away from the mainstream. This article delves into the fascinating world of Wasatch’s unique investment strategy and its remarkable journey in the emerging markets.
Breaking the Mold: A Contrarian Approach:
Wasatch Emerging Markets Small Cap Fund (WAEMX), managed by Laura Geritz, is not your typical emerging market fund. While many investors flock to the larger, well-known companies within developing economies, Wasatch has decided to take a different route. The fund focuses exclusively on small-cap companies operating in emerging markets, choosing to invest in the often overlooked, high-potential stocks.
The Allure of Small-Caps:
Untapped Potential: Small-cap companies in emerging markets are frequently under-researched and under-owned, presenting opportunities that escape the radar of mainstream investors.
Growth Prospects: These smaller enterprises have the potential to grow rapidly, outpacing their more massive counterparts.
Resilience: In some cases, small-cap companies can be more resilient during economic downturns due to their domestic focus and adaptability.
A Disciplined Investment Process:
Wasatch’s unique approach centers around extensive on-the-ground research. Laura Geritz and her team conduct thorough due diligence by visiting the companies in which they invest. This “boots on the ground” approach enables them to gain a deep understanding of the businesses, their management teams, and the local markets in which they operate.
Key Elements of Wasatch’s Strategy:
Risk Mitigation: The fund diversifies across countries, industries, and companies to minimize risks associated with small-cap investing in emerging markets.
Long-Term Perspective: Wasatch looks beyond short-term market fluctuations, focusing on the growth potential of its investments over a more extended horizon.
Quality Over Quantity: The fund emphasizes quality companies with solid balance sheets, strong cash flows, and competent management.
Impressive Performance:
The disciplined approach seems to be paying off. Wasatch Emerging Markets Small Cap Fund has delivered strong performance relative to its benchmark, the MSCI Emerging Markets Small Cap Index. Despite the inherent volatility in emerging markets, the fund has managed to outperform over the long term.
Challenges and Considerations:
While the unique strategy employed by Wasatch has proven successful, investors should recognize that this approach is not without its challenges. Small-cap stocks can be more volatile, and emerging markets are known for their inherent risks. However, for those who embrace the potential rewards and accept the associated risks, Wasatch’s approach may be an attractive option.
Wasatch Emerging Markets Small Cap Fund’s contrarian approach to investing in small-cap stocks in emerging markets is not for the faint of heart. Still, it has undoubtedly found success in its unique path. Laura Geritz and her team’s disciplined, research-intensive strategy has unearthed opportunities that many investors overlook, making this fund an intriguing option for those willing to venture beyond conventional investment choices. While there are risks involved, the potential for growth and diversification offered by Wasatch Emerging Markets Small Cap Fund may align with the long-term goals of many adventurous investors in the dynamic world of emerging markets.
