Morningstar - Q2 2022 - 65
stocks in the cheapest one. If a stock in the
portfolio rises into the next quintile, the weighting
can be reduced, and when it hits the midpoint, it
must be sold. That's a deep-value approach, in
which investors are willing to invest in a
downtrodden company without necessarily seeing
any improvement as long as they believe its
problems have been overestimated by investors or
can be solved more easily than most think.
Deep value, thus, contrasts from its cousin,
relative value, a more cautious approach.
Relative-value investors tend to wait until they see
some actual positive change, such as the
company selling an underperforming division or
installing new management with encouraging
strategic plans, before jumping in.
Pzena's focus on beaten-up fare leads here
to a differentiated, roughly 50-stock portfolio, with
price multiples well below the MSCI Emerging
Markets Index. Most of the fund's assets
are invested in Asian markets such as South
Korea, China, and Taiwan, though it also owns
developed-market stocks like Standard
Chartered STAN:GB and Cognizant Technology
CTSH that have high emerging-markets
revenue exposure.
Because this is a deep-value approach, it's helpful
to compare the fund's record not only to the
broad MSCI Emerging Markets Index but to the
MSCI Emerging Markets Value Index, as well. From
the fund's 2014 inception through March 25,
2022, the 3.9% annualized return of its institutional
shares lagged the MSCI Emerging Markets Index's
4.1% gain. But it soundly topped the MSCI
Emerging Markets Value Index's 2.6% annualized
return-and it even came out ahead of
the diversified emerging-markets Morningstar
Category average of 3.5% during a time when
value has lagged.
Given Pzena's caution on valuation, one might
expect the fund to outperform when markets
tumble. After all, these stocks are already really
cheap, so in theory their downside should
be limited, as opposed to the highfliers, which
seemingly have much further to fall. Often
it does play out this way. But in the pandemicinduced
bear market of early 2020, which ran
for about two months, Pzena Emerging Markets'
Caroline Cai, Rakesh Bordia, and Allison Fisch of Pzena
Investment Management.
morningstar.com/products/magazine
65
https://www.morningstar.com/stocks/xlon/stan/quote
https://www.morningstar.com/stocks/xlon/stan/quote
https://www.morningstar.com/stocks/xnas/ctsh/quote
https://www.morningstar.com/stocks/xnas/ctsh/quote
http://www.morningstar.com/products/magazine
Morningstar - Q2 2022
Table of Contents for the Digital Edition of Morningstar - Q2 2022
Contents
Morningstar - Q2 2022 - Cover1
Morningstar - Q2 2022 - Cover2
Morningstar - Q2 2022 - 1
Morningstar - Q2 2022 - 2
Morningstar - Q2 2022 - Contents
Morningstar - Q2 2022 - 4
Morningstar - Q2 2022 - 5
Morningstar - Q2 2022 - 6
Morningstar - Q2 2022 - 7
Morningstar - Q2 2022 - 8
Morningstar - Q2 2022 - 9
Morningstar - Q2 2022 - 10
Morningstar - Q2 2022 - 11
Morningstar - Q2 2022 - 12
Morningstar - Q2 2022 - 13
Morningstar - Q2 2022 - 14
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Morningstar - Q2 2022 - 19
Morningstar - Q2 2022 - 20
Morningstar - Q2 2022 - 21
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Morningstar - Q2 2022 - 24
Morningstar - Q2 2022 - 25
Morningstar - Q2 2022 - 26
Morningstar - Q2 2022 - 27
Morningstar - Q2 2022 - 28
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Morningstar - Q2 2022 - 30
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Morningstar - Q2 2022 - 43
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Morningstar - Q2 2022 - 49
Morningstar - Q2 2022 - 50
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Morningstar - Q2 2022 - 65
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Morningstar - Q2 2022 - 69
Morningstar - Q2 2022 - 70
Morningstar - Q2 2022 - 71
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Morningstar - Q2 2022 - 73
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Morningstar - Q2 2022 - 77
Morningstar - Q2 2022 - 78
Morningstar - Q2 2022 - 79
Morningstar - Q2 2022 - 80
Morningstar - Q2 2022 - Cover3
Morningstar - Q2 2022 - Cover4
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