AVEE targets the smallest publicly traded companies in emerging markets, a segment often ignored by mainstream EM funds that focus on mega-cap Chinese tech and state-owned enterprises. This fund exists to capture the higher growth potential of entrepreneurial businesses in developing economies.
How It Works
The fund uses a systematic approach to identify profitable small-cap companies across emerging markets, likely emphasizing quality metrics like profitability and financial stability rather than pure market cap weighting. Unlike passive EM small-cap indices that often include unprofitable speculative names, AVEE appears to apply fundamental screens. The portfolio spans multiple emerging economies including China, India, Taiwan, and Brazil, with no currency hedging.
Key Features
- Access to 1,000+ emerging market small-caps typically excluded from major EM indices
- Quality-focused selection process screens out unprofitable companies common in EM small-cap space
- Broader country diversification than large-cap EM funds dominated by China exposure
Risks
- Small-cap EM stocks can lose 50%+ in global selloffs and take years to recover
- Currency devaluations can erase 20-30% of returns even when local stocks perform well
- Political instability and regulatory changes can shut down entire sectors overnight in emerging markets
Who Should Own This
Best suited for aggressive growth investors with 10+ year horizons who already own developed market equities and want to diversify beyond large-cap emerging markets exposure. This is a satellite holding (2-5% of equity allocation) for those comfortable with extreme volatility in exchange for potential outsized returns from the next generation of emerging market winners.