Spotlight on Rakesh Bordia, Principal and Portfolio Manager, Pzena Investment Management
Global Thought Leader Spotlight
Rakesh Bordia, Principal and Portfolio Manager, Pzena Investment Management
In my role as a Co-Portfolio Manager at Pzena Investment Management, I am responsible for identifying deeply undervalued businesses across Emerging Markets, applying the same rigorous, bottom-up research discipline that has defined our firm since 1995.
Our process starts with a simple question for every company we research: would we buy the entire business at the current price? We build detailed financial models, engage directly with management teams, and focus on normalised earnings – our estimate of what a business should earn, on average across a full cycle, rather than being anchored to a one-off challenging period that may have been heavily impacted by temporary headwinds. In other words, we seek to capitalise on the market’s overreactions to transitory issues.
It is this discipline, not emotion, that guides both what we buy and when we sell. We don't style drift when value is out of favour; we stay true to our deep value investment philosophy and process, especially when it is uncomfortable to do so. And it is my role as part of the EM Portfolio Management team to ensure that we live and breathe this investment philosophy.
Opportunities and risks in emerging markets
What we are seeing in semiconductors, specifically memory, today has a familiar rhythm. Similar to the pandemic-driven surge in demand for work-from-home technology, cloud buildout, and PC and console upgrades, which drove commodity DRAM and NAND pricing sharply higher throughout 2021, Samsung, SK Hynix, and Micron are again posting outsized margin expansion on constrained supply leading to significantly higher than normal prices, this time driven by HBM, which is a function of the A.I. datacentre buildout.
We have seen this pattern before: by 2022-23 when memory’s characteristically cyclical end market demand began to wane, severe oversupply triggered one of the sector's steepest collapses, with prices falling over 50% and chipmakers swinging from record profits to losses within a short eighteen months. The commodity supercycle of 2007-08, in names like Petrobras, Vale, and Gazprom, is the longer-horizon proof that these cycles repeat.
The risk for institutional investors is being wrong in either direction: on the upside, mistaking a cyclical trough for permanent damage risks missing potentially lucrative opportunities, such as specific EM financials or strong Chinese companies that are global leaders, just as earnings start to infect; and on the downside, treating today's semiconductor margins as structurally sustainable for high fixed cost manufacturing businesses risks overpaying for earnings that won't persist.
Compounding this, Taiwan and Korea increasingly represent one correlated bet underpinned by unsustainable hyperscaler A.I. capex rather than genuine geographic diversification, as MSCI's backward-looking index reconstitution only adds to that concentration on the way up. That said, there's more diversity available outside A.I.-momentum names than the cap-weighted index’s current positioning would suggest, and building a diversified set of uncorrelated opportunities, in markets like Brazil, China and even Korea for example, is what we are focused on delivering for our clients.
Opportunities for sophisticated investors
For investors navigating this dynamic, the answer on any sector or investment isn't to avoid it outright, but to identify the fundamental drivers of returns in these sectors over a cycle and avoid buying businesses at peak multiples or peak margins, and to trim into extreme strength. For example, that means assessing what normalised earnings look like for a semiconductor business by analysing the likelihood of capacity additions, the future industry structure, demand elasticity, and the commoditised (or specialised) skew of the product mix. We accomplish this by leveraging prior industry cycles as reference points while taking into account how the industry has changed over time to evaluate long term sustainable earnings power of the business, rather than naively extrapolating today's A.I.-driven pricing forward.
On the other side of the cycle, the opportunity is in adding exposure to good companies that are screening up in the cheapest part of the market, driven by short term pain. For example, weak consumer spending in China, election uncertainty in Brazil, or company-specific missteps can all provide excellent investment opportunities to buy strong businesses at cheap valuations.
It is also important to look through geographies to the underlying exposure. A benchmark-weight EM allocation can, in practice, be a concentrated bet on global A.I. capex via Taiwan and Korea – each of whose equity markets are now larger than China’s despite having GDPs a tenth of the size. Genuine diversification means monitoring look-through, factor-level correlation, not just headline country weights. For multi-manager EM mandates, this becomes a question of mandate design: benchmark-aware managers are structurally unable to underweight peak-margin tech or rotate into out-of-favour names because tracking-error limits keep them close to the index. The practical fix is to include at least one benchmark-agnostic, deep value manager, sized specifically to manage risk to express this dislocation. Ultimately, diversification in a multi-manager portfolio isn't a function of how many managers you hold, but whether at least one of them has the freedom to look different when the benchmark itself could be the risk.
Rakesh will be presenting at Global Investment Institute’s upcoming Equities Investment Forum on Wednesday, 2 September 2026 in Melbourne CBD, Victoria. To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Rakesh Bordia, Principal and Portfolio Manager, Pzena Investment Management
Rakesh is a Principal and Portfolio Manager at Pzena Investment Management. He is a co-portfolio manager for the Emerging Markets and International strategies and became a member of the firm in 2007.
Prior to joining Pzena Investment Management, Rakesh was a principal at Booz Allen Hamilton focusing on innovation and growth strategies, and a software engineer at River Run Software Group.
He earned a Bachelor of Technology in Computer Science and Engineering from the Indian Institute of Technology, Kanpur, India and an M.B.A. from the Indian Institute of Management, Ahmedabad, India.
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