Ashoka WhiteOak Emerging Markets Trust (LSE:AWEM) — Full Year Results

0:00 Good morning, and welcome to the ASHOKA WHITEOKA WHITEOKA WHITEOKA EMERGING MARKETS TRUST PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Lunglim, investment director. Good morning, sir.

0:31 Hi there. Good morning. Thank you everyone for taking the time to be with us today. What I'm gonna do is very quickly run through a little bit around the history and background, the structure, and the process philosophy of the trust. And then I'll go through some of the more recent results and maybe some of the, I guess, things that are more current on our minds at the moment and how we're thinking about them. So without further ado, a couple of disclaimer slides that we have to get through first and then onto the presentation. So very briefly, for those of you who aren't familiar, WHITEOKA was founded in 2017 by a chap called Prashant Kemka. Prashant was formerly the CIO and the lead portfolio manager for Goldman Sachs Asset Management for both India and emerging markets.

1:18 So as you might know, we launched first with an India strategy followed by an emerging market strategy, of which this trust is one of the vehicles. So I'll leave it there for now and instead talk to you about the different pillars that we anchor ourselves around. So the four pillars of the team... Well, of the company and the process are the team, the philosophy, the process, and portfolio construction. So I'll go into each of them in a little bit more detail. On the team slide, you can see a very busy slide here. There are 48 members of the investment team. I think one of the key things that is important to get across is why we have so many people. There are a couple of reasons. One is we like to have what we call a team within team structure. So it's not just one individual looking at a stock. It's a team of analysts looking at a sector, looking at a stock, and that one helps you get better depth. But the second thing is it helps you to mitigate some of those biases and some of those blind spots that you might have over time.

2:16 But the other thing, if you think about it, the the trust, especially given the closed ended nature of it, tends to spend the majority or tends to spend a lot of it in the small mid cap part of the market. And as you know, the small mid cap part of the market has a lot less, information out there. You have to do a lot of primary research yourself, and that's where the manpower, really comes in helpful. So if we go quickly on then to the investment philosophy. So the event... Investment philosophy of WHITEOKA, it's nothing groundbreaking. It's like we like great businesses and attractive valuations, and pretty much everybody these days says the same thing. But what we think about is when we talk about great businesses, we're looking at superior returns on incremental capital. So, you know, metrics like ROIC, for example.

3:01 We're looking for scalable long term opportunities. So it's one thing to have good returns, but you have to have the ability to compound those returns to generate value for your shareholders. And maybe the part we spend a little bit more emphasis on is the execution and governance. So the focus on the management team because, as you all know, in emerging markets, there are plenty of management teams who might not be aligned perfectly with minority shareholders. So governance definitely something we take very, very seriously. In terms of valuation now, it's... We're not buy and hold forever kind of investors. We think that if you want to generate, you know, top top returns for your shareholders, you need to have a valuation discipline. So we have that. And the way we value companies, it's very much based on cash flow rather than kind of accounting earnings because accounting earnings don't accurately reflect the true economics of a business, and they're much easier to manipulate.

3:55 So we have what we call an Opco Finco framework, which is not something I'll go into detail today, But, you know, very happy to follow-up if there is interest in this. But, essentially, it's something that we've come up with ourselves, it's a way that we think breaks down a business into what really matters and to kinda focus on the real economics. So where I'll spend a little bit more time is portfolio construction. We think the way we do portfolio construction is somewhat unique. So, you know, we are stock pickers, we think that the way we generate value and generate alpha for our shareholders is through stock picking rather than through, you know, things like country allocation, making macro calls, and things like that. We think those sorts of, I guess, things are what we call factor risks rather... So rather than something to try to take advantage of, there are risks that we try to mitigate through portfolio construction.

4:52 And if you mitigate those risks successfully, then what's left to drive the portfolio relative to the benchmark is stock selection. Right? So how we do that is we create a very balanced portfolio relative to the benchmark. So in an ideal world, which unfortunately, we don't live in, but in an ideal world, you would see our portfolio looking very similar to the benchmark in terms of sector and country, but then from a bottom up stock perspective, looking very different. Right? And that's where the alpha comes from. So you... Wouldn't get caught out by country rotations, things like sector moves, oil price moves, because these are things that we would have mitigated away. Now, unfortunately, you know, the world doesn't work like that. So we will have certain over and underweights, but largely, that's how we think about the world.

5:41 Macro is something that we try to mitigate, and stock selection is where we aim to deliver the alpha. So how do we find ideas then? What we do is we divide up the world into what we call alpha rich and alpha poor parts of the market. An alpha rich part of the market is simply somewhere we are finding more of these kind of great companies at attractive valuations, and alpha poor would be the reverse. So to give you an example, if we take the market cap spectrum that we've touched on earlier, it's very obvious that small mid cap is less efficient than large cap. And so, therefore, you would expect to find more of these great companies at attractive valuations in the small mid cap section rather than the large cap section. But the important distinction here, though, is we are not saying we think small mid cap will outperform large cap if you took a blind basket of companies.

6:31 All we're saying is that from a bottom up perspective, small mid cap is where you're more likely to find the kind of companies we like relative to large cap. Now, if you then kind of move that a little bit further and think about other ways to divide up the universe, we we talk about governance, macro variables, how heavily regulated some... As a company or a sector is, that tends to lend itself to, you know, a less kind of attractive area and alpha poor part of the market. Areas of the market that are more lightly regulated where the business variables dominate the share price performance rather than something like the oil price, that tends to be alpha rich. So if you think about oil and gas, for example, as a stock picker, you could pick, you know, the best oil and gas company in the world with the greatest management team. But if the oil price goes up or goes down, that's more likely to impact the share price than anything that you've done as a bottom up stock picker.

7:26 Interestingly, what we found over time as well is the more democratic a country is, the more it tends to be an alpha rich environment. So if you think about, the way, I guess, certain countries are more autocratic in nature, it tends to have... They tend to be kind of regulations or rule changes, that come without warning, and that can make it a little bit harder for a stock picker because that's not something that you can factor into your modeling and to your bottom up research of a company. So, again, a risk factor that we try very hard to mitigate. So if you then overlay everything we've just talked about with countries and with sectors, that should give you an idea of the shape of the portfolio. So what we end up doing is being slightly overweight, areas that are alpha rich and slightly underweight the areas that are alpha poor. But, again, with that risk management portfolio construction hat on, trying to keep it as balanced as possible so we are not taking factor risks that we did not intend to take. So that's what the portfolio looked like at the end of June, so about two weeks ago, still relatively current.

8:30 I think the thing to draw your attention to the most though is down here in the bottom left where in terms of market cap weights, you can see that we are overweight small mid caps relative to the benchmark, and that's something that you should generally expect with this portfolio. Going on to how the countries look, again, relatively balanced relative to the portfolio. So the way to look at this is if you look at the two columns in the middle, that's the trust with the active weight relative to the benchmark. And then on the far right, we have what we call the active weight by country of economic exposure. So all that's... All we've done there is we own some companies that have indirect EM exposures, they might be listed in developed markets. But they have, you know, more than a half or close to all of their revenue coming from emerging markets, and so we've just reallocated them to the countries where they have the most economic value coming from. But, again, you can see the kind of biggest underweights would be about three...

9:29 Just over 3%. That would be Taiwan primarily because of how large some of the large caps have gotten there. But no big country calls, which is generally in line with what we've been saying so far. So in terms of the top 15 holdings, on the left is by absolute and on the right is by active. The one thing to draw your attention to is on the right, you can see that by active weight, the biggest position is only 1%. So we kinda go back to that point where we don't take macro bets, but equally, we're not betting the portfolio on individual names either, relative to the benchmark. We like stock picking to... Because stock picking is something we think we can add value at, we want to do it as a repeatable process. So we make many small bets as opposed to kind of betting big and hoping we get lucky because we think our stock picking is a repeatable process.

10:21 And then going on briefly to what the portfolio looks like at a moment. So if you think about what I just said, it lends itself to the fact that we have a very diversified portfolio, so a 198 holdings. But the the thing to think about is a 198 holding sounds like a lot. But if you go back to the analyst team that we have of 48 analysts, actually, the number of names per holding, the number of... Sorry, names per analyst is actually not very large at all. We are slightly more expensive than the benchmark, which is something you should expect because we own higher quality businesses than the benchmark, both in terms of the financial metrics. So if you look at ROE, for example, higher than the benchmark, but also things you can't put a number on. So corporate governance, kind of quality of management team, for example, those are things you can't really put a number on, but they deserve a higher valuation than the benchmark.

11:16 And beta low, again, that's because of the way we've designed portfolio construction. So then moving on to performance. This is performance since inception. We've kinda broken it down into different years. And then for 2026, we've given you the first two quarters as well. Performance has been has been decent. We are, since inception, about generating about 2.6% of alpha on an annualized basis. It's relatively consistent. 2025 was slightly down. This year, slightly up. '23 and '24 were up years. I've kinda used this part to to point out that, the very unique fee structure of our trust. So we are charging alpha only on performance. So we only have a performance fee on alpha. We do not have a management fee.

12:02 Right? So we're putting our money where our mouth is. We wanted to get as much alignment as we could with our shareholders, which is why we've come up with this structure. And maybe the other unique thing to talk about is we're also very cognizant that in the investment trust landscape, there's a lot of concern about discounts. So we have an annual redemption facility where investors can exit once a year. I think it's towards the end of the year at par or at close to par. So that helps to control for the discount as well. So if we... Given that, you know, we've just had our full year results, if we kinda look back a little bit at the the last kind of twelve months, well, this is actually since inception. One thing to draw out is, you know, we talked a lot about stock selection.

12:48 So it doesn't matter on the left hand side if you break it down by market cap or on the right hand side if you break it down by sectors. You can see that it's stock selection that is the main driver of alpha rather than allocation. So it's not us allocating to small mid cap at the right time or allocating to a particular sector at the right time. It's actually it's actually stock selection that's driving the alpha. And then if I just pause here for a second and let you have a look at the kind of top performers, the contributors, and detractors since inception, no real surprises, I guess, on the top 10 contributors given how much bigger the top three names are than everything else in the benchmark. But if you look further down the list, you'll see the names that are contributing are actually quite varied, and some of them are actually very much in the small mid cap space of the portfolio.

13:37 And the other thing to point out is on the detractor side, yeah, there there are names that have been detracted from the portfolio clearly, but no... I guess nothing outsized relative to the contributors. So meaning, kinda going back to that point where we don't bet on a single kinda name and hope for the best. Then if we look at the last kind of twelve months from end of March to end of March, again, a similar story really as I... Then as what you saw on the previous slide. So what I'm gonna do now is talk very briefly about AI because I think that's top of mind for a lot of investors in emerging markets. And I'm gonna talk about how we think about it. Right? So the first thing I wanna talk about is how AI looks in Asia relative to how AI looks in developed markets.

14:31 So developed markets, hear a lot about OpenAI, Anthropic, Google, Meta, Amazon, you know, these kinds of companies. These are the guys who are spending the CapEx. Right? And it's a little bit different in Asia and in emerging Asia, especially, because rather than being the guys who spend the CapEx, these are the companies who are, I guess, receiving the CapEx that is being spent by these hyperscalers. Now why that matters is it makes it look a little... It makes it a little bit more straightforward in some ways because the competitiveness of the kinda large language models at the moment is very intense. Alright? A couple of months ago, it was very clear that ChatGPT and OpenAI were the winners.

15:17 Now it seems like Claude might be moving forward. There's talk about Grok again, Gemini. So it's hard to know who wins there. But when you look at the names in Asia, all of those companies I just mentioned will be buying chips made by TSMC. They'll be buying memory made by Hynix, made by Samsung. So it's a very different kind of landscape. It's very much the picks and shovels. Now we don't have a view on AI in the sense that you're not gonna see us betting on AI. Similarly, the way I talked about factor risks, AI being a theme would be something like that. So the way we think about it is within our portfolio, we would like to have a relatively balanced exposure to AI compared to the benchmark. But the stocks we pick within that, we think will outperform what the benchmark has.

16:07 So I'll give you two very, very quick case studies. One being... So I won't talk about the big three because I think everybody knows enough about them and has heard enough about them in recent months. I'll talk instead about Delta Electronics first. So Delta Electronics are a power supply company. They are the dominant power supply solution provider for service and particularly for AI service. Why we like Delta is if you think about everything you hear about data centers and about AI, what you hear always is how much power they consume. And every new generation of GPU that NVIDIA releases actually consumes more and more power. Right? So if you are Delta, not only are you benefiting from the increasing CapEx that's being spent on AI every year, the wallet share of power solutions within AI, within spending is also increasing.

17:02 And interestingly, power within AI is evolving very, very quickly. They're kinda trying out new architectures. What that means is if you are someone who works with Delta, one of Delta's customers, because of how quickly the technology is evolving, you don't have time to work with multiple vendors to try to come up with multiple solutions. You tend to just work with the market leader to make sure your product gets out there. So Delta has an outsized market share, in the AI power server market. Similarly, the last slide I'll kinda stop on after this is a company called Elite Material. So without getting too technical, what they make is something called copper clad laminate or CCLs, just to make it easy. CCL, think of it as a key raw material for printed circuit boards. So PCBs, which is the kind of base material that you need to produce all these kind of GPUs and chips that other people use. Now, EMC make what we call high density CCL, which is essentially the highest grade CCL out there.

18:07 Before the advent of high performance computing, demand for high density CCL was not that large because it was just very, very expensive. But now, obviously, all all the high end, high performance computing, all the GPUs require this. So you've seen an explosion in demand and in earnings for companies like Elite Material. So, again, this is kinda where we're... This is how we're thinking about AI. We don't have a overweight on it. We just instead have, I guess, a relatively balanced weight relative to the benchmark. And then we have... We kinda pick the companies that we think will outperform, within that. So I'll stop the the presentation there, and I think we've got a couple of questions, in the chat. So I'll I'll go through them and, yeah, please feel free to to fire away.

18:58 So first question I'm seeing is how are you positioning the portfolio around ongoing US, China trade, technology tensions? It's a it's a good question. It's a question that we get a lot. And to be honest, the answer comes back to the point where we say, look. We try to hedge the portfolio or we try to, I guess, neutralize the factor risks as much as we can. So geopolitics would definitely be one of those. So, therefore, you won't see us taking big overweights in tech. You won't see us taking, I guess, big overweights in certain places because we don't really have a view on whether tensions get better or get worse. I think what I would say is, you know, if we if we found a company that we thought looked quite interesting today, but it... Let's say, manufactured everything in China and had a 100% of its revenue coming from The US, I think it would be hard to forecast, a company like that, because you don't know what will happen, to those revenues in The US. So the bar to get a company like that onto the portfolio might be higher.

20:07 But another way to think about that question is if we go back a couple of years now to Liberation Day when all the tariffs were announced globally, you know, we had a a quick chat, in the lead up to it and said, you know, should we do anything to the portfolio? Do we need to change the way we're positioned? And the the decision we quickly reached was, no. Let's not do anything because we think we have a very balanced portfolio. That's one thing. But the second thing is we don't really know, you know, what's gonna happen next. Right? So we decided to leave the portfolio as is and trust in our portfolio construction. And we checked the performance in, you know, the days after Liberation Day was announced and all the tariffs were announced. And in fact, the portfolio was very level, relative to the benchmark. Within the portfolio, we had some stocks that did very well. We had some stocks that did very badly. But at a portfolio level, you know, it was pretty balanced against the benchmark, and that's exactly what we wanted the portfolio to achieve.

21:06 So no no kind of big macro exposures or, I guess, factor of thematic exposures. So the next question that I'm seeing is, how are you looking at automation, robotics, and physical AI? It's it's, something that's very current, very topical. Every time we go out to Asia, which is often, you know, you see these robots being demonstrated. And I... Personal view, I think they're still quite far away, especially the humanoid robots. Like, so that's the embodiment... Embodied AI. Right? So that's the physical AI you're talking about. I think they're still quite far away from being particularly useful, but at the same time, I think the rate of improvement has been quite impressive. So if you look at the the humanoid robot half marathon that they run-in Beijing, if you look at the time they did last year, I could run a half marathon quicker than that, and I'm not particularly quick.

21:59 But if you look at the time that they did this year, there's no chance, right, that I could beat that robot. So I think the rate of improvement is is very rapid, but I think that there are a couple of things that need to be thought about. One is use cases. I think the use cases are still to be determined.

22:20 I think the second thing is who wins? There are so many brands out there, trying. So unitary being one of the big ones, but Tesla trying with the Optimus, Boston Dynamics have the robots as well. So I think it's very hard to know from the system integrator side who wins. So instead, where we're paying a bit more attention is the component players because we think a lot of these components, if you find the right component players, they are the things that are harder to do. So the the kind of brand company, the OEM is focusing on the overall system.

22:53 They're focusing on the AI part of it. They're not focusing on the hardware because that's not their value add and not their area of expertise. So for automation robotics physical AI, it's something that we're looking at with healthy skepticism, but equally impressed by, you know, how quickly it's going. But at the moment, more likely to play it through component names rather than through overall kind of brand names. The next question is about gearing. So what is it currently and how will it evolve? It's a good question. It's something we've talked a lot about internally, something our directors are very helpfully pushing us on as well. We currently don't employ gearing. It's something that we're looking at though, and that may change in the near future. But as of now, nothing to report there.

23:40 We'll we'll update you if that does change. And the next question is the view on Vietnam, currently getting a lot of inward FDI. So Vietnam... So we're benchmarked against the MSCI emerging market index. Vietnam is not currently a part of it. Vietnam is a part of the FTSE emerging market index, but we use the MSCI one. So for us, Vietnam is a kind of off benchmark market. Still a frontier market in MSCI EM class... MSCI classification. It doesn't mean we don't look at it because it's probably the candidate that's most likely to be promoted into the EM benchmark, and we are also happy to go off benchmark as well. I would say Vietnam's an interesting place. So I've been there twice in the last two years now.

24:29 It's a very vibrant place. Think I think when you look at the population, it's a relatively young population. It's a very hungry population, a population that's eager to to kind of make things happen. It kinda reminds me of actually being on the ground in China maybe ten, twelve years ago, to some extent. I would say what needs to catch up a little bit from, in my opinion, in Vietnam is the kind of institutions. So corporate governance is still a little bit weak at the moment. I think that, yeah, you tend to get big groups dominating. So I think you had... You're not quite seeing the kinda small mid cap space becoming vibrant enough. So I think, you know, if we see a little bit more there, kind of led from the bottom up rather than led by big groups, I think that might make it a bit more interesting. Interesting.

25:21 So, yeah, definitely a market we're paying attention to, but not something that is, I guess, a very big part of our universe at the moment. So a few on China stocks. So we owned Barbar and Tencent. Yeah. So China is China is an interesting market. It's kind of been a little bit left behind again. So we've we've kinda gone a couple of quick circles on China, it feels. Because if you think back to 2024, China was seen as uninvestable. We were hearing people say that they would never invest in China again. It's becoming Japan. And then China kind of exited '24 and '25 as a very, you know, strong performing market, which kinda goes to show that making country calls is extremely difficult.

26:11 So I I think what we're seeing in China is from a... As a bottom up stock picker, China's a very interesting market. Right? Because it is a very large deep market. So in the question here, we've mentioned Alibaba and Tencent. But, actually, you know, beyond the kind of big names, the market goes... It's very, very deep. It goes down all the way to the small mid cap space, you find lots and lots of really interesting companies there. So I think as a stock picker, China is always somewhere that we find interesting ideas. One of the questions we get a lot though is, but what about geopolitics? What about the overall state of the economy? So I think consumer related names, like consumption has been quite tough in China. I think consumer confidence still hasn't quite come back.

26:59 The real estate market is not getting better. It's not getting that much worse, and it's also now shrunk to a point where it's, I guess, less relevant. But that still hasn't helped consumer confidence. So I think what we're seeing is, you know, I think good ideas on the bottom up. I think the geopolitics side of things, it bites both ways. So you see companies that export who have been hit hard by tariffs. But equally, you're seeing companies in China, like Chinese companies in China, who compete with foreign companies supplying to China on the higher end. And those foreign companies are now finding it tougher to operate because of that geopolitical environment, and these Chinese companies are taking share on them. So I think China will always be a market where we see decent opportunity from a bottom up basis, but also cognizant of the macro risks. So on the portfolio construction side, trying very hard to manage that risk as best we can.

28:00 And investors are very nervous about Korea and Taiwan given leverage of retail investors like the Taiwan bubble. Many seem to be rotating back into India's mid caps and elsewhere. Yeah. I think that's true. I think Korea has always been a very leveraged market and Taiwan to some degree as well. I think the exuberance that we've seen in the... Well, this year especially, I think that probably hasn't helped. The correction that we're going through at the moment, especially in Korea, actually think it... To some degree, it's a relatively healthy correction because it's something that needed to happen. I think people needed to be reminded that markets don't go up in straight lines. And if they do, they they unfortunately tend to come back down in similarly vertical lines.

28:46 So it's quite a healthy correction that we're seeing at the moment. I think what the way we the way we think about the world is very much, look. I think we follow earnings, and I think a lot of these companies, the fundamentals are still very strong. So we try to look through the noise. Rotation back into India small mid caps, we've not really seen that happening in a big way yet. I think I think that will come. I think India had gotten a little bit expensive at some points over the last year, but valuations seem much, much more reasonable now. So I think we will see a little bit of rotation back in there, but we haven't seen too much of it yet.

29:32 In terms of it being an Asia focused fund, I think a lot of it has to do with... Sorry. The question that we have is seems like a very Asia focused fund. No mention of South Korea, Brazil, and Mexico. I think a lot of that has to do with the benchmark because the universe is now very Asia focused. If we look at this slide here, in the index, 83% of the index is now in Asia. And, I guess, the rest of it would be, Europe, Eastern Europe, Middle East, Africa, and LatAm. So we have relatively similar positions to, the benchmark in that sense. We have about just over 80% of the fund in Asia and just under 20% of the fund in those other markets. But as we said earlier, we are judged against the benchmark, and so we try not to take country calls.

30:21 But we do have exposure in in, you know, in LatAm and Eastern Europe. We're finding interesting ideas, for example, in Poland. I think the Poland consumer space is actually looking pretty interesting. Consumer spending is is doing pretty well there. Brazil, Mexico, politics tends to play a little bit of a part. But, again, finding interesting ideas there, especially more along the mid cap space, not so much in the large caps. So the large caps of Brazil like Vale and Petrobras always been a bit more of a struggle because of the historical tendency of the government, I guess, to get involved. And in Vale's case, a couple of not so good corporate governance issues, with some accidents that they've had. But, yeah, very much a global emerging market fund. Just, I guess, currently, the index is more heavy on on Asia, and therefore, to some degree, so are we.

31:20 So I'll stop there for now. I'm not kinda seeing any questions. That... That's great. Thank you for answering all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Week company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, can I please just ask you for a few closing comments? Yeah. Well, thanks again so much for for spending your morning with us. It's it's very kind of you, and we we appreciate the interest and and the support. Yeah. Please feel free to to reach out if you do have any further questions that I haven't managed to answer here, and, yeah, I hope you all have a very good day ahead. Thank you so much. That's great. Thank you for updating investors today. Please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.

32:09 This will only take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you all.