To win in emerging markets, avoid the passive investing rush

LONDON (July 13): When Robert Marshall-Lee started running an emerging-market equity fund six years ago, he decided the only way to withstand the surge in passive investing strategies was to stop paying attention to them.

Breaking ranks with peers whose goal was to beat the benchmark, the Bank of New York Mellon Corp. money manager instead identified about 50 companies he thought were well run and worth holding long term -- and it paid off. He delivered 12% annual returns in the past five years, eclipsing all competitors, human and robot, tracked by research provider Morningstar Inc.

“Competition from exchange-traded funds doesn’t even feature for me, I am very unconcerned,” said Marshall-Lee, a 22-year investment veteran whose top-performing Newton Global Emerging Fund is among the 2.6 billion-pound ($4.55 billion) portfolio he lead manages from London. “If you track the index you end up holding a lot of undesirable companies.”

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