Only 300 of the top 5,000 emerging market companies have a market capitalization above $10 billion. Yet according to the Barron’s article “Growth Comes in Smaller Packages”, most of Wall Street’s attention is focused on EM’s mega caps.

The article notes that many of the large top companies are Chinese financial and tech companies as well as state-controlled enterprises, which are heavily dependent on the commodity super-cycle. These companies are “likely to struggle to find growth that can meaningfully move the earnings needle.”

In contrast, the article highlights how Heidi Heikenfeld, Portfolio Manager of Oppenheimer Emerging Markets Innovators Fund (EMIAX), focuses on the rapidly growing numbers of smaller entrepreneurial health care, tech and consumer discretionary companies that are not well-represented in the MSCI Emerging Markets Index.

Heikenfeld is interested in the drug development and technology themes. Another theme, aspirational spending by women, is driving her interest in Chinese education companies because she believes women are likely to spend heavily to improve their children’s education. The eagerness of mothers to find alternatives to sugary sodas has also led her to invest in a Mexican manufacturer of water purification systems.

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