The Craft Development World Fund (ARTYX) is crushing the market this year by tilting traditional investment principles into emerging markets. The fund, which has $3.1 billion in assets under management, is up 19% this year, outperforming its benchmark MSCI emerging markets index by about 16 percentage points, according to FactSet. According to Morningstar, its stellar performance in 2023 puts it in the first percentile among its peers. The fund has an expense ratio of 1.28%. Lewis Kaufman, a portfolio manager who has overseen the fund since its founding in 2015, says the secret ingredient to his outperformance is so-called “household companies”. mat”. “These are companies that are based in developed markets but are tied to emerging markets economically,” Kaufman said in an interview. “We like them not only for the speed of sales, but also because they sell aspirational products and services.” By residence, the Craft Development World Fund has only 57% of its portfolio in emerging markets. However, the risk exposure for emerging markets would increase to 70% when considering the economic risk by revenue, Kaufman said. The San Francisco-based manager says Estee Lauder is an example because the cosmetics business is highly correlated with consumer demand, foreign travel, and duty-free opportunities in China and beyond. Around the world. Nvidia, the largest holding fund with a 6.7% share, is also a passport company as the chipmaker generates a significant amount of revenue from China and other developing markets. The chip giant has been at the center of the artificial intelligence obsession in the stock market this year, and Nvidia is now atop a $1 trillion market cap after issuing a strong forecast. shock of future demand. “I’ll always look to keep the positions and the rest of the company… I think Nvidia has been a source of funding for us,” Kaufman said. The manager, who earned a master’s degree in business administration from Duke University, oversaw Thornburg Investment Management with a similar strategy for six years before joining Artisan Partners in 2015. In addition to those companies That passport, the fund also invests in a range of companies based in emerging markets. For example, the online marketplace MercadoLibre in Argentina, the technology group Sea Ltd. of Singapore and Chinese food delivery giant Meituan. Kaufman said he also invested in Kweichow Moutai, a Chinese premium liquor company that is partly publicly traded and partly state-owned. The manager said the company has a market capitalization of more than $300 billion. By comparison, Diageo, whose brands include Johnnie Walker, Smirnoff and Guinness, has a market capitalization of about $97 billion. “I think that speaks to the inherent scalability of the Chinese market itself,” Kaufman said.