Aikya believes that emerging markets are widely misunderstood, and much of the confusion starts with the index. Rising GDP does not reliably translate into shareholder returns, because the MSCI Emerging Markets benchmark is dominated by; state-owned enterprises, politically connected conglomerates, and whichever theme happens to be in vogue, commodities in the 2000s, Chinese property after that, and semiconductors today, with Korea, Taiwan and the chip names now more than 40% of the index. These cohorts rarely compound; on a diluted basis, index earnings have been broadly flat over the past decade even as the underlying economies have grown.

Beneath that surface sits a genuine economic reality. Improving GDP per capita, and current-account and fiscal positions that have been managed far more prudently since the Asian financial crisis and the GFC, combine with still-under-penetrated domestic consumers to create durable, unglamorous growth. This is where Aikya focuses: domestically oriented, cash-generative businesses — the everyday franchises selling soap, shampoo and cosmetics across India, China, Brazil and South Africa — many of which have grown 10–15% in US-dollar terms for two decades, with the tailwind of premiumisation still ahead of them.

The manager fits a space we like. Aikya was established in March 2020 and runs close to US$6 billion with a team of around ten, led by Ashish Swarup, Tom Allen and Rahul Desai, who between them bring wealth of experience and a lineage in the Stewart Investors quality-and-stewardship tradition. Pinnacle provides operational scale while leaving the team full investment autonomy, so they can run the portfolio benchmark-unaware, free to go where the opportunity is.

Their philosophy rests on quality, governance and downside protection. In emerging markets you cannot take the rule of law or institutional quality for granted, so the first question Aikya asks is about stewardship: who owns the business, what their capital-allocation record looks like, and how they treat minority shareholders. Their central tenet is that you lose money two ways — by buying poor quality or by overpaying — so both quality and valuation must be disciplined, targeting double-digit returns with limited downside. The result over the past decade has been roughly 10% per annum portfolio earnings growth with markedly lower volatility, around 8% over the past six months, against some 24% for the index.

The timing also complements our existing exposures. Aikya holds little or no Korea, Taiwan or chip exposure. Rahul is no AI sceptic — he and Ashish are engineers — but his supply-and-demand read on the chips cycle is sobering: the demand already priced in would require the equivalent of seven new Googles within four years, while the real bottleneck has shifted from chips to the power grid, pointing to eventual excess inventory and a cyclical correction. The lasting beneficiaries, he argues, are the software and application users of cheaper infrastructure, where Aikya is adding.

For our portfolios that means real diversification: earnings and valuations that are less stretched, and returns far less entangled with the concentrated, leverage-affected trades now dominating Western and North Asian markets. We are pleased to welcome Aikya to the fold.