The investment team seeks to capitalize on opportunities in developing world economies by investing in companies that compound business value over a market cycle, while mitigating the volatility of returns.
The team focuses its analysis on businesses that are economically tied to the developing world irrespective of domicile. It believes that focus on a company’s underlying economic exposure should result in investments that over time position the portfolio to benefit from the true drivers of the opportunity set in developing world economies. Those drivers include increasing domestic demand, low penetration of basic goods and low levels of household debt, among other factors.
The stock selection process emphasizes financially sound, self-funding companies, which the team generally considers to include those that exhibit low absolute or relative debt levels, limited capital intensity or visibility into free cash flow or capital generation. The team believes these businesses are less likely to impair capital during periods of duress and may compound earnings per share and book value per share at above average rates. The team believes this approach has the potential to create a compelling risk-adjusted return.
The team believes investments exposed to the developing world have unique risks that leave them vulnerable to capital flight during periods of market duress, and in turn capital impairment or constrained fundamental development. In an effort to mitigate these risks, the team seeks to emphasize investments in markets with limited dependence on foreign capital. It believes this macro-economic framework benefits stock selection because capital flight can be inflationary and lead to tighter monetary policy which can impact economic growth and earnings growth.
Lewis S. Kaufman, CFA, is a managing director of Artisan Partners and founding portfolio manager of the Developing World team. In this role, he is the portfolio manager for the Artisan Developing World Fund.
Prior to joining Artisan Partners in February 2015, Mr. Kaufman was a managing director and portfolio manager for Thornburg Investment Management, where he managed the Developing World Strategy from its inception in 2009 through January 2015. Mr. Kaufman also co-managed the International ADR Strategy from 2007 through 2013, after joining Thornburg in 2005 as an associate portfolio manager. Prior to joining Thornburg, Mr. Kaufman held various investment-related positions with Morgan Stanley and Citigroup. Mr. Kaufman graduated cum laude with a bachelor’s degree in English from Colgate University and holds a master’s degree in business administration from Duke University Fuqua School of Business.
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