Finding Quality Growth in Emerging Markets with Ian Smith

Ian Smith, portfolio manager at William Blair, joins Excess Returns to break down emerging markets, global diversification, and why EM may offer a very different opportunity set than US stocks. We discuss AI capex, the role of Korea, Taiwan, China and India, the impact of the dollar, quality investing, valuation, and how active investors can think about opportunity in a world shaped by AI disruption and geopolitical change.William Blair Investment Managementhttps://im.williamblair.com/The Problem With Qualityhttps://im.williamblair.com/insights/articles/the-problem-with-qualityTopics covered:Why emerging markets are not one single tradeHow AI capex is reshaping EM indexes and performanceWhy Korea, Taiwan and China are central to the AI supply chainThe role of the US dollar in emerging market returnsWhy EM index concentration is higher than many investors realizeWhat past innovation cycles can teach us about the AI buildoutHow AI is changing the definition of quality investingWhy China’s manufacturing strength creates both opportunity and riskThe long-term case for India despite high valuationsHow William Blair evaluates quality, trajectory and underappreciationWhy valuation in emerging markets requires more than simple multiplesThe one investing lesson Ian Smith would teach the average investorTimestamps:00:00 Intro04:10 Why emerging markets are not one market08:37 Why EM is underrepresented in global indexes13:16 How the dollar impacts emerging market returns18:37 AI capex, picks and shovels, and EM supply chains24:17 How William Blair is using AI in the investment process28:30 Why quality and growth have decoupled in emerging markets33:19 Why AI disruption creates opportunity for active managers37:30 China’s overcapacity, competition and global manufacturing edge42:00 India’s long-term growth drivers and valuation challenge47:00 Finding underappreciated quality in EM stocks52:01 Deglobalization, China and the future of global trade56:09 The one lesson Ian Smith would teach investors