EJUL - How To Use Quality To Seek To Reduce Drawdowns In EM
By Alejandro Saltiel, CFA
There are important differences in emerging market ((EM)) companies, especially when it comes to those with significant government ownership (state-owned enterprises, or SOEs) and those without it (non-SOEs).
Government ownership may lead to corporate governance issues that arise from the inherent principal-agent problem and cause operational inefficiencies and weaker levels of profitability.
The predominant industries among non-SOEs are those associated with strong earnings and revenue growth potential, such as consumer and technology companies. Non-SOEs also have higher aggregate profitability metrics than the broad index, MSCI Emerging Markets ((EM)) Index, and provide