BCA Research, a provider of independent investment research, has launched EM Equity Sector Strategy (EMES), a new service that provides investors with actionable research, analytics and investment recommendations within the emerging markets equities space. 

The service combines BCA’s proprietary macroeconomic framework with industry expertise, fundamental company analysis, and quantitative modeling to identify unique insights and actionable investment opportunities that are applicable to a broad range of risk profiles and investor requirements.

Brijesh Malkan, BCA’s Corporate Development Director at BCA, said: “It’s taken almost a year to build a quantitative algorithmic model that takes every single EM market. We take 3000 different data points and we provide the ranking and scoring on every single EM equity sector.”

“We look at the fundamentals in terms of margin growth, sales growth and other things that drive growth from a fundamental’s perspective. We then add BCA secret sauce macro overlay. And finally we take technicals. And then our research team should be able to provide a qualitative insight on top of that,” he added.  

The EMES research team is led by Garry Evans, Chief Strategist, who has 30 years of market experience.

“Our clients will also get the qualitative insight that interprets that model, because it’s still crucial,” said Malkan. 

EMES delivers in-depth investment cases and market updates on a weekly basis, regular analyst access and an online toolset, including a database and a proprietary model that scores and ranks every country/sector pair to identify opportunities within the EM markets. 

The model was back-tested over a 15-year period, with consistently strong results.  

For example, over the past 10 years an equally weighted portfolio of the 20 sectors most highly ranked by the model returned 217%, whilst the entire universe returned 77% and the bottom-ranked 20 sectors only 25%.

Malkan said that the whole focus of the product is to help pick the right sub-sector without impacting or reducing a risk of picking the wrong sub-sector.

“The problem with EM investing is making sure you pick the right sub-sector without picking the wrong one. For example, South African consumer discretionary over the last few years would’ve returned you over a 100%. But if you’ve also picked SA materials at the same time it would’ve pretty much wiped out your gains,” he told Africa Global Funds.

EMES covers markets that make up the MSCI EM index, however Nigeria was added due to clients’ demand, according to Malkan.

At the moment, the product covers all of the GICS level 1 sectors (10 sectors) in South Africa and Nigeria. 

Malkan said that other African frontier markets will be added over the next three months: “We’ve seen a lot of demand for African investment opportunities from our clients. In addition to SA and Nigeria, we will be covering Angola, Egypt, Ivory Coast, Kenya, Ghana, Morocco and Zambia.”

“We will only cover a country or a market if we think there is a unique piece of investment research that will help our clients make money in that market,” he added.

In addition to the latest release, there is a series of additions planned over the next six months to support BCA’s expansion from macro to mid (sector) and micro (bottom-up) research, according to Malkan.

“We will be launching a product focused on hedge funds in November. We are also about to launch a global ETF strategy research product in October,” he said.