Rebecca Lewis, Partner and Co-CEO
Everyone knows that knowing your purpose is important in life; we know it as individuals and we say it to guide our children. For the more data driven amongst us, empirical studies have shown that organisations that are clear about their purpose are more successful, and more resilient. So, how do we reflect on our purpose at Arisaig Partners?
Arisaig means “safe place” in Scottish Gaelic. Our purpose is to be a “safe place” for clients looking to access emerging market growth. We do this by investing only in the rise of the emerging market consumer. Our portfolio companies sell essential products and services to hundreds of millions of people; they are grocery retailers and pharmacies, they sell household insecticides, cosmetics, paint and PVC pipes, they are the portals used to help people find jobs or sell their products online. They do boring things well; year after year they steadily compound their earnings by meeting the needs and aspirations of consumers that are just getting started. Our companies are good at what they do and as excited about the long-term growth potential in their markets as we are. They are run by entrepreneurs that want to improve and so they grow their dominance by reinvesting behind their brands, their distribution and their people.
We sat down as a Partnership team at the end of 2023 and reviewed the backtesting for Arisaig’s Global Emerging Markets strategy over the previous decade. The businesses had grown, and we’d beaten our respective Index, but in our view, we hadn’t provided enough of a “safe place” to our clients. The low single-digit compound dollar return we had achieved over the previous 10 years was not sufficient and had lagged the return of our Asia strategy.
Yes, we could point to the strength of the dollar, the perennially challenging news flow for emerging markets, disruption from COVID, or even the fact that it had been just a handful of tech stocks that had been the drivers of global markets, but clarity of our purpose made us dig deeper.
As we stared hard at the data two conclusions became clear:
(i) stick with Asia: our strategy of buying and holding the highest quality consumer businesses which compound earnings quickly enough to be able to translate this growth into dollar returns works best in Asia. It works particularly well in India given the broad-based contribution of nearly a dozen businesses in an ever-growing universe for this large consumer-led economy, but it also works in South East Asia and China when we stick with opportunities off the beaten track. In Latin America, we had only found one stock that had outrun the currency headwinds over the long term.
(ii) focus on “under the radar” opportunities: our performance had been hampered by missing some of the smaller opportunities in South East Asia which the liquidity profile of our Arisaig Global EM Strategy limited access to.
We spoke to our clients at length and returned capital at the start of this year for our two global emerging market strategies – the Arisaig Global EM strategy and Arisaig Next Generation strategy. This was not a small decision. It was nearly half of our business in asset terms. It was also hard personally as it meant three of the six Partners who had focused on these strategies would depart the firm.
Six months on, it is clear to us that doubling down on our purpose and focusing on the Asian consumer has made us an even better business; one that will continue to deliver for our clients and provide a “safe place” for those looking to access the rise of emerging Asia.