Our positions reflected our focus on self-help stories, our re-opening thesis, and traditional economy stocks benefiting from the higher capital expenditure that corporates have been under-invested in the last few years. It also benefits from the transition to a greener world mapped out at last November's COP26 climate summit.

We believe our research has helped us identify good investment opportunities among EM companies whose managements have become proactive in restructuring in the wake of the pandemic. These self-help measures include initiatives like cutting costs, selling assets, shifting capacity, and changing product mix.�

In our view, there are ample opportunities for us to identify pockets of "forgotten" EM stocks. For example, we were positioned in a cyclical commodity play in the first stage of the pandemic recovery in 2020. Then we rotated to the next stage and added to financials as the rate hike cycle started. Now, we believe the recovery is entering yet another stage and portfolio positioning has shifted back towards the core end of value.

China �

We took advantage of the recent market weakness as we believe that regulatory crackdowns are cyclical in nature.

• We found a compelling entry point into online travel agent Trip.com on our economic re-opening thesis and on valuation grounds. The company's Q4 2021 earnings beat expectations and we believe the company will maintain its dominant market share in the online travel agency business thanks to its competitive advantages. In our view, it is well positioned to enjoy the long-term growth of Chinese outbound travel, which generates faster revenue growth and higher operating margins than domestic business.
• We bought shares of Tingyi, one of the largest food and beverages companies in China by revenue with market-leading positions in most of its segments in noodles and beverages.

Russia �

The Russian market was a relatively small part of our portfolio, but risks increased meaningfully after the sanctions by Western nations significantly impacted the financial sector and its ability to settle U.S. dollar transactions. We quickly reduced our risk and exposure to Russia during the quarter.

Mexico

We added to our positions in Mexico because we felt stocks were trading at attractive valuations and the economy was set to benefit from the uptrend in commodity prices.�

• We bought shares in Grupo Mexico, which we think is a sum-of-the-parts story offering a resilient dividend clip on copper in the medium term and unique organic growth optionality in the longer term.

Consumer Discretionary

We cut our exposure to the sector as a result of reduced holdings in certain segments.

• We trimmed Prosus, a Dutch multinational conglomerate company, which holds Naspers' global internet business. It holds shares in Tencent, which faced regulatory headwinds. The company also had to write off a sizeable stake in one of Russia's largest internet companies, VK Group, as a consequence of sanctions on the group's CEO amidst the conflict in Ukraine.
• Huayu Automotive is one of China's biggest auto parts suppliers. We sold shares as we see mounting pressure for Huayu's major customers, Volkswagen and General Motors, from local brands. The company itself faces competition from local suppliers in many of the emerging areas such as electrification and advanced driver assistance systems.

Brazil

We found some opportunities in Brazil, where we think valuations are attractive in an economy benefiting from strong commodity prices.

• We bought shares of packaging company Klabin, which is an environmental, social, and governance (ESG) friendly business and in our view is undervalued by mainstream investors. It is a low-cost producer adding capacity at the low-end of the cost curve in a commodity with attractive medium-term fundamentals. As an integrated paper and packaging producer, we believe it is likely to benefit from strong secular trends such as increasing e-commerce penetration, plastic-to-paper substitution, and increasing interest in negative emission businesses and technologies.
• BTG Pactual is one of the largest investment banks in Latin America. We bought shares as the bank is diversifying into asset and wealth management businesses, which we think have more predictable earnings and deserve a higher multiple than the firm's sales, trading, and investment banking businesses.