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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Wasatch Frontier Emerging Small Countries Strategy 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Wasatch Frontier Emerging Small Countries Strategy)

Primary Source Intelligence • Q3 2026 Letter Analysis

Wasatch Frontier Emerging Small Countries Strategy Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Wasatch Frontier Emerging Small Countries Strategy. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Positioning StanceCONSTRUCTIVE

GeographyFrontier Markets, Emerging markets

Digest Analysis

Quick Take

"Underperformed benchmark in Q3 amid AI pullback and Middle East turbulence, but remains constructive on idiosyncratic frontier compounders in Georgia, Mexico, and the Philippines."

Executive Summary

During the third quarter of 2026, the Wasatch Frontier Emerging Small Countries strategy underperformed its benchmark, the MSCI Frontier Emerging Markets Index, which advanced 0.77%. Relative performance was negatively impacted by the strategy's exposure to the information-technology sector amid a global pullback in artificial intelligence-related names, as well as an off-benchmark exposure to challenging market environments in Turkey and Saudi Arabia. Financials served as the largest relative headwind, as the strategy did not own rallying bank stocks in Colombia, Kenya, and Kazakhstan, while strength was concentrated in holdings located in Georgia, the Philippines, Vietnam, and Romania. The manager's macro outlook evaluates the repercussions of the U.S.-Iran conflict that ignited in February, which elevated global oil prices and pushed the Federal Reserve to implement an interest rate hike in September. While conventional market theory suggests higher U.S. rates and an appreciating dollar create persistent headwinds for frontier and developing economies, the manager argues the historical transmission mechanism is mitigated. Frontier and emerging markets entered this cycle with fortified fiscal balances and sound monetary frameworks, while structural shifts in global trade continue to diminish international reliance on the U.S. dollar. Portfolio attribution highlights strong operating performance across select consumer and industrial compounders, led by Georgia Capital PLC, Mexican discount retailer BBB Foods, Inc., and Philippine terminal operator International Container Terminal Services. Detractors included Turkish equipment manufacturer Astor Enerji due to local market liquidity strains and regulatory inquiries, Israeli semiconductor metrology supplier Nova Ltd. amid broader tech volatility, and Saudi fintech Rasan Information Technology Co.

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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

62%

CautiousHigh

Moderate (62%)

The manager outlines clear, fundamental investment cases across multiple individual companies such as Georgia Capital, BBB Foods, and International Container Terminal Services. However, conviction is tempered by an acknowledgment of heightened volatility across several non-benchmark countries like Turkey and Saudi Arabia, alongside monitoring posture on holdings under regulatory scrutiny.

Growth Outlook

58%

BearishBullish

Neutral (58%)

Outlook is constructive regarding bottom-up fundamentals in frontier markets, with the manager rejecting conventional fears that U.S. Federal Reserve rate hikes will trigger systemic frontier currency or fiscal crises. However, near-term optimism is tempered by the real-world drag from elevated oil prices, regional war between the U.S. and Iran, and local market disruptions.

Risk Appetite

65%

DefensiveAggressive

Balanced (65%)

The portfolio remains oriented toward growth compounders and off-benchmark markets such as Saudi Arabia and Turkey, without initiating broad defensive hedges or wholesale liquidations. Still, the fund is actively monitoring regulatory headwinds and sentiment-driven drawdowns in tech holdings rather than pursuing aggressive leveraged expansion.

Capital Deployment

50%

De-riskingDeploying

Net Neutral (50%)

No significant cash deployment or liquidation programs are reported, with capital remaining largely allocated to current portfolio holdings across frontier jurisdictions. Activity during the quarter was marked by holding monitoring and participation in secondary liquidity events like BBB Foods' equity offering.

Forward Guidance

60%

CautiousExpansionary

Neutral (60%)

Guidance focuses on disciplined bottom-up stock selection and maintaining exposures where long-term competitive advantages and domestic economic strength remain intact. The manager indicates patience and selective monitoring of underperforming assets rather than signaling immediate aggressive shifts in cash balances.

Language Signal

55%

BearishBullish

Balanced (55%)

The commentary balances terms like 'growth', 'attractive value proposition', 'strength', and 'durable competitive advantages' against prominent discussions of 'turmoil', 'selling pressure', 'regulatory scrutiny', 'war', and 'monetary tightening'. The net balance reflects pragmatic realism with a moderately constructive bias toward bottom-up earnings resilience.

Perceived Risk

70%

Low RiskElevated

Elevated Risk (70%)

Macro and geopolitical risks are prominent, specifically the war between the U.S. and Iran, escalating Middle Eastern tensions, surging oil prices, and an unexpected interest rate hike by the Federal Reserve. Additional market-level liquidity squeezes in Turkey and regulatory inquiries in Saudi Arabia and India also elevated the perceived operating risk environment.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

Opportunities are selectively concentrated in specific small economies including Georgia, Armenia, Mexico, the Philippines, and Romania where company-level market share gains and secular consumption trends continue. In contrast, broader macro volatility has made alpha generation scarcer across tech infrastructure and turbulent Middle Eastern markets.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The strategy maintains a multi-year compounding focus, explicitly stating an investment approach based on durable competitive advantages and long-term prospects over short-term macroeconomic forecasting. Management emphasizes riding out cyclical and sentiment-driven fluctuations in names like Nova and Rasan over multi-year horizons.