Fund Watch


How Baron Emerging Markets Is Winning

Anjelica Tan

A few obscure stocks help propel this fund to the top.



Emerging-markets stocks have been mostly submerging the past year or so. But Baron Emerging Markets fund has managed to stay afloat and deliver a respectable return. The fund has also excelled against the competition, beating 96% of diversified emerging-markets funds over the past 12 months.

Manager Michael Kass credits Baron’s philosophy of deeply researching companies for the successful run. Doing his homework helped him find such obscure companies as Shuaa Capital, a United Arab Emirates financial firm (and the fund’s only holding in so-called frontier markets); Steinhoff International, a South African furniture maker; and China’s Sihuan Pharmaceutical. All three stocks have at least doubled over the past year.

Kass, with the help of four analysts, begins by developing big-picture themes, such as financial reforms in China and government-policy changes in Brazil. He then looks for shareholder-friendly companies that are run by entrepreneurial managers and have sustainable competitive advantages and the potential to generate long-term earnings growth. Kass or an analyst travels abroad to meet with company executives every few months.

The developing world is undergoing a sea change, says Kass. Growth has shifted from state-controlled companies to truly private entrepreneurial concerns. “The type of companies we own are the latter,” he says. “This is why we have this huge wind at our back.”

diversified emfs


Editor's Picks From Kiplinger


You can get valuable updates like Fund Watch from Kiplinger sent directly to your e-mail. Simply enter your e-mail address and click "sign up."

More Sponsored Links


DISCUSS

Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy


Advertisement

Market Update

Advertisement

Featured Videos From Kiplinger