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 Management
https://im.williamblair.com/

The Problem With Quality
https://im.williamblair.com/insights/articles/the-problem-with-quality

Topics covered:

• Why emerging markets are not one single trade

• How AI capex is reshaping EM indexes and performance

• Why Korea, Taiwan and China are central to the AI supply chain

• The role of the US dollar in emerging market returns

• Why EM index concentration is higher than many investors realize

• What past innovation cycles can teach us about the AI buildout

• How AI is changing the definition of quality investing

• Why China’s manufacturing strength creates both opportunity and risk

• The long-term case for India despite high valuations

• How William Blair evaluates quality, trajectory and underappreciation

• Why valuation in emerging markets requires more than simple multiples

• The one investing lesson Ian Smith would teach the average investor

Timestamps:

00:00 Intro

04:10 Why emerging markets are not one market

08:37 Why EM is underrepresented in global indexes

13:16 How the dollar impacts emerging market returns

18:37 AI capex, picks and shovels, and EM supply chains

24:17 How William Blair is using AI in the investment process

28:30 Why quality and growth have decoupled in emerging markets

33:19 Why AI disruption creates opportunity for active managers

37:30 China’s overcapacity, competition and global manufacturing edge

42:00 India’s long-term growth drivers and valuation challenge

47:00 Finding underappreciated quality in EM stocks

52:01 Deglobalization, China and the future of global trade

56:09 The one lesson Ian Smith would teach investors