A Successful Growth Strategy in Emerging Markets

Christopher Franz: Baron Emerging Markets, which carries a Morningstar Analyst Rating of Bronze, features a skilled portfolio manager who has posted strong results.

Michael Kass has led this fund since its 2010 inception and joined Baron Capital in 2007, and is supported by a dedicated analyst team. While he shares a similar growth-oriented investment philosophy with many of his colleagues, Kass’ approach here is more thematic, considering ideas such as financialization in India and an expanding emerging-markets middle class. The portfolio has a clear growth tilt, as Kass is comfortable with pricier, fast-growing stocks, but its economic moat exposure tends to top peers, according to Morningstar’s risk model. Since its inception, the strategy has bested its MSCI EM Index and peers, with less volatility, and has been consistent, too, beating its index in 95% of rolling five-year periods. Now, the strategy has received considerable flows amidst strong performance, and with that its number of holdings have grown and its gravitated to larger-cap names. Still, with Kass at the helm, as long as its size doesn’t get in its way, the strategy has strong potential.