How far should you diversify before you dilute returns? In this episode, George sits down with Damian Bird, Portfolio Manager for Polen Capital’s Emerging Markets Growth strategy, to challenge conventional wisdom on diversification, active vs. passive in EM, and where the most exciting compounding businesses live today.
Damian revisits the classic Evans & Archer (1968) research on portfolio size, explains why 15–20 names can cap volatility—and why professional portfolios still settle around 30–35 due to real-world correlations. We dig into why emerging markets today host several of the world’s best businesses (think semis, EVs, fintech, and the AI supply chain), why index exposure often buys you the “average EM company,” and why selective, quality-biased active may make more sense right now.
We also cover governance nuances country by country, when Polen’s “sleep-easier” approach can underperform (speculative manias), and why allocations anchored at 70% US / 5% EM might be ripe for a rethink.
You’ll learn:
The point where diversification becomes over-diversification
Why EM stock quality dispersion makes active selection powerful
How valuation, currency, and earnings growth set up EM’s risk/reward today
Practical governance red flags (SOEs, chaebols, related-party risks)
Polen’s four pillars: best businesses, concentrated, long-term, willing to be different
Chapters
00:03 Intro & why diversification needs a rethink
03:07 Humility in investing: the “do nothing” lesson from 2008–09
06:17 Low turnover and making only meaningful changes
09:43 How many stocks do you need? (Evans & Archer; EM reality)
13:06 Correlations & why ~30–35 holdings often hit the sweet spot
16:03 Why not just buy the index? Active vs. passive in EM
19:25 EM vs. developed markets: where the great businesses are now
23:06 Case studies: semis, EVs, e-commerce, fintech, AI supply chain
26:36 Valuations, policy, and the EM macro setup
30:09 Earnings growth vs. multiple compression: what it means for returns
33:42 Governance & minority protection: what to avoid (and why)
36:45 Dividends, buybacks, and improving EM corporate behaviour
40:07 Rethinking the US-heavy global allocation
43:42 Early signs: EM momentum and flows
47:15 Damian’s path (and why he loves EM)
50:13 On-the-ground change: Singapore, India, Poland, Vietnam
53:33 When Polen underperforms (and why)
56:37 Team, Somerset Capital transition & one-fund focus
59:42 Book pick: The Outsiders (capital allocation)
1:03:05 One-minute pitch: why EM now
1:06:20 Wrap-up
Guest: Damian Bird, Portfolio Manager, Polen Capital — Emerging Markets Growth
Host: George Ladds, Money Wise UK®
Links mentioned:
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Disclaimer: This conversation is for information only and isn’t investment advice. Past performance is not a guide to future returns. Investing involves risk, including loss of capital.