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William Blair tells ISERS emerging‑markets growth strategy has underperformed recently but fundamentals look stronger
Summary
William Blair presented its emerging‑markets growth strategy to the ISERS board May 21, citing valuation headwinds, China policy shifts and tariff‑related uncertainty as drivers of underperformance and detailing team additions and on‑the‑ground research.
Renee McGrail, senior client relationship manager at William Blair, and Vivian Lynn Thurston, partner and co‑portfolio manager for William Blair’s emerging markets strategies, presented to the Imperial County Employees' Retirement System board on May 21 about the firm’s emerging‑markets growth strategy and recent performance.
McGrail described William Blair as a Chicago‑based, employee‑owned investment firm (she said the firm has “over 66,000,000,000 in assets under management”) and introduced the global equity team and recent senior research hires. Thurston said William Blair is a “quality growth investor,” combining fundamental stock‑picking with a proprietary quantitative screening tool (called “Summit”) and on‑the‑ground company research in emerging markets.
Why it matters: Trustees heard that the strategy’s stock selection process and team depth are designed to generate alpha, but that the strategy has faced a difficult market backdrop: a strong short‑term tilt to cheap valuations, sector/country rotations and tariff‑related volatility. Thurston said those forces, particularly valuation dispersion and weakness in Taiwan/Korea tech names after debates about AI hardware, were major headwinds in the first quarter.
Performance and positioning: Thurston said the strategy “has underperformed” since ISERS invested mid‑last year; she attributed much of the underperformance to first‑quarter valuation leadership by the cheapest quintile and to sector/country shifts. She reported that, quarter‑to‑date since April 1, the strategy “is up today, up about 9% in absolute dollar terms, and alpha up about 200 basis points,” while noting the fund remained behind its benchmark year‑to‑date. The presentation also highlighted that the portfolio has higher quality metrics—return on equity, cash‑flow ROIC and earnings growth—than the benchmark, and that the team recently increased analyst coverage in industrials and IT.
Country and company notes: Trustees asked about country exposure and individual holdings. Thurston said Japan is excluded because the mandate is emerging markets only; she confirmed China and India exposures are driven by the team’s factor and fundamental work. In response to a trustee question about Xiaomi, Thurston summarized that Xiaomi is primarily a China‑domestic story with a large smartphone market share and recent entry into electric vehicles; she said Xiaomi has minimal direct sales to the U.S. market today.
Next steps: William Blair fielded questions about market structure, China policy, tariffs and Latin America positioning. There was no board action requested at the presentation; trustees received the firm's materials and were directed to manager materials and holdings pages for additional follow up.
Ending: McGrail and Thurston thanked the board; trustees moved to the next agenda item.
