How do we invest in emerging markets?

The Guinness Emerging Markets Equity Income Fund invests in emerging markets with a disciplined adherence to four key pillars that are designed to harness the potential of EM economies into long-term capital appreciation and income growth for investors.

Quality

Quality is at the centre of our approach. We seek companies that have translated competitive advantages into sustained, measurable returns on capital and maintain a strong balance sheet.

We don’t invest in the most cyclical sectors, as these businesses don't meet the requirement that returns on capital be persistently above the cost of capital. This is particularly beneficial in emerging markets as it moves us away from the more volatile, commodity-driven industries that are typically associated with the region. 

One example where our quality approach leads to differentiated outcomes concerns Korean memory chip stocks (specifically Samsung Electronics and SK Hynix). These businesses have a history of poor returns on capital, as the memory business is highly cyclical and requires substantial invested capital to maintain market share. As these types of stocks have a large weighting in benchmarks such as the MSCI Emerging Markets, the Fund’s lack of exposure provides investors with a very different portfolio profile compared with peers.

Value

We seek to invest in companies that are trading at a discount to their intrinsic value, assessed in cashflow terms. The typical scenario is a company where the market expects returns to diminish over time, while we expect them to persist. Over time, we think that this valuation discount provides positive support to total return. 

We assemble the portfolio using value as a criterion within our quality-defined universe. This ‘bottom-up’ approach to assembling the portfolio stands in contrast to other methods in which potential holdings are assessed with a ‘top-down’ approach that values cyclical macro themes rather than fundamentals. 

Dividend

We look for companies where the dividend is very much an outcome of sustained cash generation. We seek a balance between returning excess cash to shareholders while retaining capital to reinvest in the business. The compounding effect of reinvestments ultimately drives long-term earnings growth and, consequently, dividend growth.

However, we don’t operate a high-yield strategy. Companies that stretch for high dividend yields beyond what they can sustain risk having to cut dividends in the future, especially in market downturns. Focusing on consistent dividend growth helps to stabilise growth in the long term.

Read more about Emerging Markets Dividend Investing

Conviction 

The portfolio is concentrated, with 36 equally weighted positions. These positions are rebalanced once they move outside predetermined limits, capping our individual stock exposure (typically at 4%) and limiting our stock-specific risk. This gives us a very different position sizing from the benchmark. For example, the Fund holds TSMC, with a maximum position size of 4%, a structural underweight relative to the benchmark (which is approximately 14.5%, as of May 2026).  

Furthermore, due to the nature of an equally balanced portfolio, the Fund will consistently sell shares when a holding increases in value and buy shares when value falls. This creates a natural ‘buy low, sell high’ mechanic.

Differentiated emerging markets exposure

This investment philosophy offers investors a sustainable, long-term approach to investing in emerging-market equities. With the Guinness Emerging Market Equity Income Fund, investors can harness the medium- and long-term drivers of growth in emerging markets while mitigating the volatility often associated with the region. The Fund is designed to act as the core of an emerging markets allocation and as a diversifying source of investment income. Learn more about the Fund and how to invest here.