Skip to main content

The Globe and Mail

What Excel Funds chief investment officer Christine Tan is buying and selling

Excel Funds chief investment officer Christine Tan says it ‘makes sense’ to include emerging markets as part of a diversified portfolio.


Emerging markets have performed well in recent months and Christine Tan says it's not too late for investors to get in. The chief investment officer at Excel Funds Management Inc., which has about $800-million over all in assets under management, believes emerging markets are still a good bet for longer-term, diversified investors. Her Excel Emerging Markets Fund was up 11 per cent year-over-year as of Sept. 1 and up 26.4 per cent over the past three years. That compares to a 24-per-cent increase in the MSCI emerging markets index over the past three years and a 6.3-per-cent increase in the S&P/TSX composite index over the same time. The Globe and Mail recently spoke with Ms. Tan about her outlook for emerging markets, a stock she's buying more of and one she missed.

What concerns are you hearing from investors today?

The main concern, starting from the big picture, is valuation, globally. If you look at U.S. equities, the U.S. economy is recovering, albeit it at a relatively muted pace. Corporate balance sheets are stronger than they were prefinancial crisis, but valuations are rich. Going forward, the earnings-growth picture isn't necessarily going to be in line with where equities are trading. That applies across asset classes.

Story continues below advertisement

Even in emerging-markets valuations for some of the more defensive businesses, such as consumer stocks, are trading at relatively rich multiples compared to some of the cyclicals. A concern in emerging markets over the past 18 months is, "Are we too late? Emerging markets have outperformed by such a big margin. Have we missed it?" If we look at emerging markets on a longer-term basis, say five years, they have lagged. Even with the recent outperformance in [emerging market] equities and fixed income, they still trade at a discounted valuation – and fixed income offers a higher yield than developed market peers. I'm not advocating switching everything to emerging markets … but in a diversified portfolio, it still makes sense.

What's your take on where emerging markets are heading in the short term?

I tend to look at the world as a glass half empty. I think that's my job. In the short term, because of how far we've come across all equity classes and fixed income, I wouldn't be surprised if we saw a short pullback especially heading into September and October, which typically is a bit of a jittery period.

What's a stock that you've been buying lately?

We recently added to our position in Alibaba. It's the epitome of "new emerging markets." Alibaba is the Amazon of China. It is growing in leaps and bounds. It's also doing really well with mobile penetration. We like the earnings-growth potential and that management is investing [the company's] free cash flow in new businesses that are somewhat different than e-commerce but that also complements it. For example, it has started to build up its cloud infrastructure and is now the largest private cloud-services provider in China. It is trading at a premium to other Chinese businesses, but given the growth potential, we still think there's an upside. That's why we added to what was already a top holding. We increased our position by about 15 per cent. It's now about 3.7 per cent of the fund. Our most recent purchase was around $151.98 (U.S.). Our average price for the stock is $113.73 [The stock is currently trading around $170].

What stock have you sold recently?

We just exited Grupo Supervielle, ticker SUPV in New York, an Argentinian bank. We bought it shortly after it went public in the second quarter of last year. The stock got to our target of $20. What triggered the sell was management's decision to increase the float by about 30 per cent. In the long term, it's a positive move … but in the near term, there could be noise. We would revisit it again. Our average price on the stock was $13.41. [The stock is currently trading around $20.50].

Story continues below advertisement

What's the one stock you wish you bought?

New Oriental Education, ticker EDU in New York. It's an education company that started by focusing on English training in Mainland China. It started to go into kindergarten-to-Grade-12 education tutoring about two years ago. I looked at it then and it was trading at a discount to TAL Education, ticker TAL in New York, a core holding of ours. Education is one of our favourite investment themes, especially in China, where education spending is viewed as non-discretionary. My biggest error was overestimating the competitive pressure and underestimating both TAL's and EDU's ability to operate around each other and find their own space. EDU stock has almost tripled since. It's now trading at about 35 times next year's earnings. [The stock now trades at around $81.] The valuation has caught up with the story. It's hard for me to chase.

This interview has been edited and condensed.

Report an error Editorial code of conduct
As of December 20, 2017, we have temporarily removed commenting from our articles as we switch to a new provider. We are behind schedule, but we are still working hard to bring you a new commenting system as soon as possible. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to