| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 4.8% | 0.6% | 22.8% |
SGA's Emerging Markets Growth portfolio delivered strong absolute returns of 22.8% net in 2025 but trailed benchmark indices due to extreme market divergence favoring cyclical and momentum-driven assets. The AI infrastructure boom drove concentrated performance in semiconductors and technology hardware, while quality growth strategies faced headwinds. The portfolio's underweight to South Korean memory chip companies and competitive pressures on e-commerce holdings including Alibaba, Sea Limited, and MercadoLibre contributed to relative underperformance. However, TSMC, Infosys, and Fast Retailing were strong contributors. SGA believes the AI CapEx cycle is unsustainable due to structural constraints and sees concerning signs of excess in private credit markets. The firm maintains conviction in quality businesses with pricing power and recurring revenues, noting that the portfolio trades at its steepest ever discount to MSCI EM while many cyclicals trade at peak multiples. With the quality factor at historically depressed levels and the portfolio attractively valued, SGA sees meaningful upside potential as earnings recover and valuations normalize, though patience is required.
SGA builds high-conviction portfolios focused on quality growth businesses that are anticipated to achieve consistent mid-teens earnings growth with reduced variability, supported by predictable revenue and cash flow generation, while the current market dislocation creates attractive valuation opportunities for disciplined, quality-focused investors.
Entering 2026, the portfolio is well positioned. The sustained focus on cyclicality and momentum has driven the quality factor to historically depressed relative levels. SGA believes the Emerging Markets Growth portfolio is attractively valued given the long-term earnings power of its holdings. As earnings recover and valuations normalize, meaningful upside potential exists. While patience is required, SGA remains committed to businesses with pricing power, recurring revenues, and strong balance sheets.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 8 2026 | 2025 Q4 | 035420.KS, 0700.HK, 1299.HK, 1398.HK, 9983.T, BABA, BJFN, CPALL.BK, CPI.JO, FEMSA, GRAB, HDFCBANK.NS, HTHT, INFY, MELI, MMYT, OR.PA, SE, SLM.JO, TCS.NS, TME, TOTS3.SA, TSM, UL, WALMEX.MX, XP, YUMC | AI, Cyclical, E-Commerce, emerging markets, Quality, semiconductors, valuation |
TSM INFY 9983 JP BABA SE GRAB TME OR FP |
The rapid acceleration in artificial intelligence has been a key catalyst behind the recent cyclical resurgence across emerging markets. Large-scale capital expenditure by global hyperscalers… |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
E-commerceSeveral investments in e-commerce leaders across Asia and Latin America, including MercadoLibre, Sea Limited and Alibaba, faced a more competitive operating environment during the period. As long-term investors, SGA observes that competitive intensity in these markets tends to ebb and flow over shorter time horizons, with market leaders typically emerging from such periods with strengthened strategic positions given inherent network effects. |
Marketplaces Competition Network Effects Asia Latin America | |
Private CreditThe space has become very popular with lots of LP money chasing returns. Some sponsors have paid extremely high prices and lent on unfavorable terms. Many have also lent into the AI/data-center space to businesses with questionable futures. |
Credit Lending Risk | |
QualityThe company emphasizes investing in businesses with excellent economics, durable competitive advantages, and high-integrity management. This quality focus is evident in concentrated equity holdings and operating business acquisitions. |
Durable Advantages Management Quality Economic Moats Competitive Position | |
Semiconductor CycleThe portfolio's underweight to South Korean semiconductor companies, including Samsung Electronics and SK Hynix, was a key driver of relative underperformance. These stocks continued to benefit from strong AI-related memory demand and elevated investor enthusiasm. Memory chips are largely a commoditized product with weak pricing power, extreme capital intensity and pronounced boom-bust cycles that lead to volatile earnings. |
Memory South Korea Cyclical Commoditized Volatility |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | TSM | Taiwan Semiconductor Manufacturing Co Ltd | Information Technology | Semiconductor Manufacturing | Bull | New York Stock Exchange | AI, CapEx, Foundry, Margins, semiconductors | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | INFY | Infosys Ltd | Information Technology | IT Services | Bull | National Stock Exchange of India | AI, cashflow, Itservices, Margins, Outsourcing | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | 9983 JP | Fast Retailing Co Ltd | Consumer Discretionary | Apparel Retail | Bull | New York Stock Exchange | Apparel, Branding, growth, Margins, supply chain | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | BABA | Alibaba Group Holding Ltd | Consumer Discretionary | E-Commerce | Bull | New York Stock Exchange | AI, cloud, ecommerce, Investment cycle, scale | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | SE | Sea Ltd | Consumer Discretionary | Internet Retail | Bull | New York Stock Exchange | ecommerce, Emerging markets, Fintech, Logistics, platform | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | GRAB | Grab Holdings Ltd | Industrials | Passenger Ground Transportation | Bull | NASDAQ | deliveries, Fintech, Margins, mobility, Provisions | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | TME | Tencent Music Entertainment Group | Communication Services | Interactive Media & Services | Bull | New York Stock Exchange | Competition, Content, Margins, monetization, Streaming | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | OR FP | L’Oréal SA | Consumer Staples | Personal Care Products | Bear | Euronext Stock Exchange | Beauty, growth, innovation, Rotation, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| 0700.HK | Shinya also visited Shenzhen, where Star Magnolia Capital organized an educational visit for our families to Tencent's headquarters, alongside meetings with several promising early-stage companies. |
| 1299.HK | Proceeds were deployed to three Asian companies: 1) Alibaba Group Holding is the largest Chinese e-commerce and cloud company, which has stabilized its e-commerce business and invested in the growing cloud business; 2) Asian insurance company AIA Group Limited is leveraging growing demand from Hong Kong, China and other Asian countries; and 3) Chinese company Ping An Insurance may benefiting from the structural demand for health and protection products given the aging population and limited coverage of national insurance. |
| 9983.T | Fast Retailing was a top contributor during the quarter, driven by strong execution across its global operations. China returned to growth in August and September, with management guiding for further improvement in both revenue and profit in the coming fiscal year, a turnaround following topline decline in China this fiscal year. |
| BABA | Alibaba was a detractor during the quarter after the company reported mixed fiscal Q2 results. While cloud revenue growth accelerated and margins remained stable, the core commerce business struggled with slowing growth and significant profit pressure, particularly in the quick commerce segment where heavy investment and intense competition led to a sharp decline in profitability. |
| CPI.JO | Capitec (South Africa) continues to take share within the South African banking system. |
| GRAB | Grab Holdings was a detractor during the quarter despite delivering solid Q3 results and raising full-year revenue guidance. The results were balanced across user and transaction growth, revenues, and margins, with growth in gross merchandise value and monthly transacting users accelerating from last quarter. |
| INFY | Infosys was a top contributor during the quarter, driven by steady execution, resilient recurring revenues, and strong performance in large-scale digital transformation projects. The company's industry-leading operating margins and high client retention supported robust free cash flow generation, while notable contract wins, such as the NHS workforce management solution in the UK, highlighted Infosys's ability to deliver innovative platforms for global clients. |
| MELI | E-commerce Volatility: turbulence in our e-commerce portfolio companies, Sea Ltd (Southeast Asia) and MercadoLibre (Latin America), amidst aggressive price wars. |
| MMYT | MakeMyTrip, India's leading online travel booking portal, has been a much better investment than Britannia Industries, India's leading biscuit brand, over the past three years. |
| OR.PA | In 2024, it seemed to us that other investors were unduly focused on a slowdown in consumer spending in China, an important market for L'Oréal yet contributing only 17% of its sales. L'Oréal is a broad, balanced business such that in any given year, faster-growing parts of the world will typically offset the weaker ones. We saw this in 2025, where strength in markets such as Europe, the Middle East and South America offset sluggish markets in China and the US, allowing L'Oréal to deliver a year of solid earnings growth. |
| SE | During the quarter, we initiated a new position in Sea Limited, a Southeast Asian consumer internet company with an integrated ecosystem combining e-commerce, digital payments, and entertainment. Sea has a diversified business model, with its Shopee e-commerce platform, a mobile-centric marketplace that provides integrated payments, logistics infrastructure, and seller services. |
| TME | Tencent Music Entertainment (TME) was a detractor during the quarter, as concerns around rising competition and margin dilution weighed on investor sentiment despite strong top- and bottom-line results. The continued growth of Soda Music, backed by Douyin's traffic, raised questions about their potential impact to the long-term competitive dynamics. |
| TSM | TSMC was a top contributor during the quarter, driven by robust demand for advanced semiconductor manufacturing and improved gross margins as AI continues to grow strong and the non-AI segment showed signs of recovery. Management raised its revenue growth guidance to the mid-30% range, and given continued strength in demand, AI-related growth targets are expected to move above the current mid-40% level. |
| UL | Unilever is a global consumer goods company that develops and markets everyday food and personal care brands for billions of consumers worldwide. Anchored by iconic brands such as Dove, Knorr, Hellmann's and Vaseline, Unilever's refreshed management team is driving improved execution and strategic discipline to deliver more consistent growth, with a focus on higher-margin categories. Specifically, we appreciate their undertaking of various self-help initiatives, including cost-savings programs and brand divestments, which we believe will help unlock sustained value in the future. Despite Unilever's strong outlook, it trades at a discount to its peer group as prior undermanagement has resulted in 1% volume growth for the past decade. This provided us the opportunity to invest in a strong company with leading brands and an improved management team that is poised to increase per-share value. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
