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Opportunities Exist in Emerging Markets Despite Volatility

TOM BUTCHER: David, there has been a plethora of news reports recently about the emerging markets, most of them bad. What's the real story?

DAVID SEMPLE: You're right, Tom. Emerging markets is the asset class that a lot of people like to kick right now, when it’s down. And I think part of the issue is that we matter more nowadays, so any ills or issues that the developed world has, is being reflected back much more by the emerging markets. China, for instance, is apparently to blame for everything, even including bad weather, or whatever it happens to be. The reality is very different, because as emerging markets have gotten bigger, they've gotten more disparate, more differentiation between markets, between countries, and between companies in particular. That's the other side of the coin. For us, you have to be very specific about where you're investing in emerging markets. Gone are the days of looking at emerging markets as being a beta block, generally speaking, for global growth. Global growth has definitely ticked down a couple of notches in people's expectations, but there are still some great pockets of growth in emerging markets. You don't want to put a tag line on it, like "the new emerging markets" as that's marketing-speak. But I can say, in reality, as we look at companies, and we interview management and we kick the tires, there are some great places to invest in which really contradict this overall gloom surrounding emerging markets, which is somewhat cyclical and perhaps somewhat structural, as well. There really are some excellent opportunities out there.

BUTCHER: But if volatility continues, how would you allay investor concerns?

SEMPLE: We have seen significant volatility in the past in emerging markets. The key to us is really to stick to our philosophy about investing in emerging markets. We want to find companies that have structural growth at a reasonable price, so both characteristics help us in terms of finding companies that are going to grow more one year over the next. These companies are going to have higher operating profitability. Also, when you become invested in them at the right prices, that gives you a lot of comfort that when the volatility ceases or diminishes, you are likely to find yourself in a very good place in terms of obtaining the upside when emerging markets rebound.

BUTCHER: Great. David, thank you very much.

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