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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Harding Loevner Emerging Markets Equity 2024 Q2 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q2 2024 Letter Analysis

Harding Loevner Emerging Markets Equity Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Harding Loevner Emerging Markets Equity. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Annualized+10.37%

Positioning StanceNEUTRAL

Digest Analysis

Quick Take

"Emerging markets strategy underperformed due to AI concentration effects, cheap stock outperformance, and Latin America political headwinds. Added Indian banks and Brazilian pharmacy chain at attractive valuations."

Executive Summary

Harding Loevner's Emerging Markets strategy returned 0.1% gross in Q2 2024, underperforming the MSCI EM Index's 5.1% gain. The underperformance stemmed from four primary factors: high concentration of market returns in AI-driven semiconductors led by TSMC, strong performance of cheap stocks in major EMs including state-owned enterprises, persistent underweight to expensive Indian markets, and overweight to Latin America facing political and rate headwinds. Taiwan rallied 15% on AI supply chain strength while China recovered 7% on government stimulus efforts. Elections across major EMs created mixed reactions, with Mexico falling 16% on political risk concerns. The portfolio added two new Indian financial positions at attractive valuations and a Brazilian pharmacy chain during market weakness. Despite recent challenges, the manager maintains conviction in their quality-growth approach, noting their strategy has outperformed in 80% of rolling 10-year periods. They view current market conditions as unsustainable and expect high-quality companies to demonstrate their value when economic headwinds emerge.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

High conviction demonstrated through concentrated portfolio with named positions, specific sizing decisions, and willingness to maintain underweight positions despite underperformance. Manager explicitly states belief in process and long-term track record while making targeted additions during weakness.

Growth Outlook

38%

BearishBullish

Neutral (38%)

Manager acknowledges current market optimism around AI and government-led investment but expresses caution about grossly elevated valuations and unsustainable dual optimism. Expects economic headwinds to eventually emerge, favoring quality companies.

Risk Appetite

25%

DefensiveAggressive

Defensive (25%)

Portfolio maintains selective risk-taking by adding new positions in Brazil and India during market weakness, but preserves diversification constraints and maintains disciplined valuation approach rather than chasing momentum.

Capital Deployment

15%

De-riskingDeploying

De-risking (15%)

Modest net deployment through addition of three new positions (ICICI Bank, HDFC Life, Raia Drogasil) while exiting one (Kotak). No cash level changes mentioned, suggesting rotation rather than significant new capital deployment.

Forward Guidance

0%

CautiousExpansionary

Cautious (0%)

Manager takes a balanced approach - maintaining existing positioning while selectively adding during weakness. No clear directional bias toward aggressive deployment or defensive positioning, focusing on bottom-up opportunities.

Language Signal

38%

BearishBullish

Balanced (38%)

Language emphasizes risks, challenges, and unsustainable market conditions more than opportunities. Terms like 'grossly elevated valuations,' 'disappointing performance,' and 'structural headwinds' outweigh positive language about selective opportunities.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

Manager identifies multiple specific risks including political risks in Mexico, higher-for-longer rates, elevated valuations in India, and unsustainable market optimism. Risks are named and discussed in detail with potential impacts outlined.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

Manager sees selective opportunities in specific areas like Latin America during weakness and Indian financials at better valuations, but characterizes the broader environment as requiring patience and selectivity due to elevated valuations.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

Manager emphasizes long-term approach with references to 10-year rolling periods, expectation that quality companies will prove their worth over time, and willingness to hold through short-term underperformance. Strategy designed for multi-year value realization.