Investing in Emerging Markets: Insights from Ali Akay, CIO of Carrhae Capital

The Case for Emerging Markets

• 💡 Emerging markets offer crucial diversification benefits, especially as US stocks have significantly outperformed in recent years, leading to concentrated portfolios.
• 🚀 While US companies are strong, owning assets like emerging markets, which can be low correlated or even inversely correlated to US assets, is a prudent strategy.
• 📈 Emerging markets present a higher potential for active management alpha compared to other markets, alongside more attractive relative valuations.

Navigating EM Risks and Opportunities

• 🧠 Investors must consider a holistic approach, scrutinizing country, industry, and bottom-up levels, as currency devaluations, interest rates, and regulations can significantly impact stock performance.
• ⚠️ The mantra for emerging markets is that "only the paranoids survive", emphasizing the need for thoroughness and humility, akin to the lessons from the Battle of Carrhae.
• 🌍 Geopolitical events and tariffs can lead to currency adjustments, but they don't necessarily sink emerging markets as trade and currencies adapt, allowing great companies to continue compounding.

Country-Specific Insights

• 🇬🇷 Greece is highlighted as a small, uncorrelated market with a strong recovery in financials and asset pricing, benefiting from tourism and its Eurozone membership.
• 🇹🇷 Turkey offers alpha potential due to high local investment driven by negative real interest rates, despite its volatile macro policies.
• 🇲🇽 Mexico is strategically positioned for North American trade, with a well-thought-out plan to engage the US constructively and reduce imports from Asia.
• 🇰🇷 South Korea faces demographic challenges but has an incentive to improve governance and break up concentrated wealth groups, with opportunities in memory foundries and parent companies.
• 🇿🇦 South Africa is noted as a market that has moved from