Good stuff, it's 11 o'clock I think, so we should get going. My guest this week is Prashant from Ashoka WhiteOak Emerging Market Trust, so we'll be talking to him in a minute. But before we do that, we've got a lot of news to cover. So three things that I pulled out from this week's news, we'll run through them in order. So Brown Advisory US Smaller Companies, first, to be honest, given how much, well, how dominant the US market has been, how well it's performed, US Smaller Companies have lagged. But this one has lagged the benchmark for US Smaller Companies as well. You see, it's gone sideways for quite a while now.
It's not very big. It's the smaller of the two funds. I'll show you actually how it compares to the JP Morgan fund, which is the only other US Smaller Trust we've got. And you can see that it's smaller, it trades on a wider discount, it's more expensive to run, and it underperforms it by quite a margin over most time periods, really not too great. And then if you look at its own stats, you can see how poorly it's doing relative to the benchmark. So there, on a sort of cumulative basis or 12-month returns, not very good. So what the board has decided to do, first they're going to tweak the management fee. So the first part of that, to base on the lower of market cap and NAV, will make more of a difference in the short run. But they're also cutting the first tier of the fee. So you can see that it drops from 0.7 down to 0.65 of the first 200 million of assets. So that will help a bit and will bring it closer to the ongoing charge on the JP Morgan fund. But that's hardly sort of window dressing in the great scheme of things. They're also saying if we don't turn performance around, we are going to give you the chance to get out at NAV.
And the trigger for this is a five-year measurement period that ends on the 30th of June 2028. So we're already quite a way into that period already, and at the moment they've got quite a way to make up. So they're almost 13 percentage points behind the Russell 2000 Index, and they'll have to make that up and maintain that outperformance all the way through to the end of June 2028 if they're going to avoid this. And in the meantime, they've still got a continuation vote. So I think this is a fairly bold move by the board. It probably preempts any kind of attack from anybody else, and I think shares will work on this, but obviously we'd quite like to see the fees down.
Jupiter Green is one where they've already thrown in the towel. We knew about that in December. It was all announced just towards the end of the year. It's not very big, and that's part of the reason why they've decided to give them up. So what they've announced today is how that mechanism is going to work. So it's a normal kind of Section 110 scheme. So we, you know, we've used these in mergers and stuff all the way through the last couple of years. But here you get a choice of cash at NAV less costs, for value, or FAIRV, or a roll over into an open-ended fund. And the beauty of rolling over to an open-ended fund is that you don't trigger a capital gains tax. And this, what we're talking about in a minute, is exactly the sort of playbook that SAR is trying to use when it's going after its next set of targets.
I think that I'd still prefer to be in a closed-end fund, and the only option here is Impax Environmental Markets. It's got much better long-term performance than the Jupiter Green fund, much lower charges, it's a much bigger fund, much more liquid, and you can still buy on a 10.6 discount. So you can get out of this at value and roll into Impax at 10.6, and that's what I would do if it was me. But the roll over option that they're offering is a unit trust, it's a UCITS fund, it's basically the same kind of remit as Jupiter Green. It's a much bigger fund, 685 million, and because it's got quite a similar remit, it's got quite a similar portfolio, so actually the cost of shifting the assets into the UCITS fund is not going to be very much at all.
But it actually comes with a higher ongoing charges ratio. I mean, people are always banging on about open-ended funds are more efficient than closed-end funds. I don't generally find that's always backed up in practice. And you've got a direct comparison here between an open-ended and closed-end fund, and the closed-end fund is cheaper.
But the thing that might skew people's decisions, and this is why I'm sort of saying I'd like to take a look at Impax, is that the performance of the open-ended fund versus benchmarks is not great. So the two things that they've chosen to compare it to are the MSCI All Country World Index, so just generally what you can get from, you know, the whole market, and as we know, it's been skewed by US stocks, and also they're comparing it to the global funds. So because there is an environmental sector in the Investment Association, it's one of these things that they don't actually completely match all the sectors that we've got in investment companies. And so environmental, as we know, struggled a bit, and this fund has struggled relative to those benchmarks. And you can see it here again, cumulative figures of one, three, five years, it's got a long way behind.
And relative to the world index, that's a long way behind over five years. The surprising thing for me was how badly the Investment Association Global funds have done over five years. So they're much closer to Jupiter Green, which has got all these constraints about what it can invest in, environmental stuff, whereas most funds in that global sector won't have those constraints. And that seemed quite strange, that they've done quite that badly. That's something for another time, though, why they haven't performed. Anyway, so there we go. You might look at those numbers and think, I don't really want to do this. I'd much rather have the cash and then maybe choose what I want to buy instead.
In terms of the practicalities, so they keep a tiny bit back in liquidation pool. There are expenses associated with this of 745,000. These are not cheap things to do because you've got to have all these different meetings and all this paperwork you have to produce and liquidators you have to pay for. And this is all to be borne in mind when you're thinking about this thing. But because there's a rollover option, Jupiter management is going to make a contribution to total costs. I looked through the announcement, I couldn't find out how much that will be, but it does look to me as though it's going across all costs, so it's not just for the people that roll over.
And then in terms of the timing, as we know now because we're voting SAR, you have to get your votes in early. So the closing date of the 3rd of March, if you actually want to vote through a platform, we have to be a week or so before that and choose what you want to be invested in, cash or roll over by the 4th of March. If you don't tick the cash box or if you don't actually submit anything, then you're going to roll over into the alternative fund. Then there's a meeting on the 5th of March, last trading, so you won't be able to deal the shares after the 7th of March. And then the second meeting, 14th, and then you'll get cash towards the end of the month.
Which brings us on to SAR round two. So it's trying to do the same thing, or basically it's calling meetings to ask that these four trusts do the same thing, so offer a choice of cash or roll over into fund. This is going to be a different proposition to what they put forward before. I still think there's going to be a lot of resistance to this because it comes back down to this point that we were making all the way through the first round of SAR stuff, which is that you probably don't want to be selling these trusts now and you want to retain the exposure. But if you go into an open-ended fund, well, first, does the open-ended fund exist? Then the managers of these things are currently, these are out of favor. They face redemptions. They've got to keep cash on hand to fund that. If the market dips again, they won't have cash on hand to buy cheap stocks. There are good reasons why, in terms of poor performance for a sector, that trusts do better because they can lay the foundations for better performance down the line. And I think that's something to bear in mind. I mean, as somebody else has pointed out, everybody who's a shareholder in these things chose to be invested in a closed-end fund rather than an open-ended fund. They don't necessarily want to make that switch.
Now the thing with this, because it involves a liquidation, it needs 75% of those voting to approve to push it through, where the previous ones were 50/50. That makes SAR's job an awful lot harder in terms of convincing people. It's interesting. I mean, I completely understand the frustration here, and you know, boards generally are quite reserved in what they say, but City of London Natural board has made the point, bottom there, you know, this is a complete waste of time and resources and shareholders' funds. They were already looking at what they could do to give those people who wanted out an out, if that made sense, that whole process. And they didn't, you don't need to have all these meetings and just rush the whole process. And so they're quite upset about it, and I understand why.
We've got quite a surprise one. We've seen the European Smaller Companies requisition withdrawn this morning because the board has clearly been talking to SAR, saying, look, probably the same sort of thing. We were already down the line thinking about what to do about your stake and how we're going to get you out. So give us a period of time and we'll see if we can come to a resolution that makes sense with everybody. And this is the key thing, really, that all these proposals, you've got this massive overhang of stock, but boards must weigh up whether giving SAR an exit is actually going to be counterproductive for everybody else. Reigns as a shareholder, obviously, you shrink the assets down, then the ongoing charges ratios tend to go up. That's a bad thing. You know, liquidity goes down. There's all sorts of reasons why bigger funds are better. As we know, there's been quite a clamour for bigger funds. So routinely shrinking things in the way that SAR wants to do is not necessarily a good idea. Anyway, there are no meetings yet. Nobody's actually put forward a circular yet. That will all happen in time and kind of watch this space.
So that is enough from me. We will now talk to Prashant. So thank you very much for doing this. Good morning. We've got some slides from you. I'm basically going to hand over to you and let you talk through the case for investing in the fund, please. And then we'll come to some questions afterwards. So if people have got questions, just put them into the chat box on YouTube and we'll get to them at the end. So over to you.
Thank you, thank you, James, for having me here on your weekly news show, and thank you to all the audience who's watching it. So as you can see on the screen, we're going to talk about Ashoka's WM strategy. It's a trust vehicle. We started coming up to two years now in May. So what we have here is a team that has a long and strong track record. And myself was earlier CIO and lead PM at GAM, Goldman Sachs Asset Management, during which tenure I led EM strategy as well as India strategy. It had strong peer group leading amongst the top rankings performance. We as a team have continued and built upon the approach that I instituted there, and we've further honed it here, and we apply that process and approach on a very inefficient segment of the global equity market. Now the same approach, in my view, can work in any market, developed or EM, but EM markets being more inefficient allow for greater exploitation, if you will, of alpha opportunities, and that results in greater magnitude of alpha. And we bring this to invest in a best-in-class structure where the investment team does not get paid unless it generates alpha or outperformance, which is really the value add of any investment team, what can they earn over and above the benchmark. So that also in a way shows that we're putting our money where our mouth is and saying if we can't add alpha as we claim to have the expertise for, then we won't get paid.
If we go to the next slide, then it shows how the trust has done over the last nearly two years. The top right-hand side, you'll see that the NAV and the share price have both outperformed the benchmark. We'll see the specific numbers in a few minutes, but the bottom right-hand side graph shows that for the most part, the trust has traded around the NAV. The share price has been around the NAV, so hardly any discount. As of today, I think it's at a small premium. The trust has grown somewhat from 30 million at launch to currently 40 plus million. Most of it has come from performance. As you all know, it's not been a very conducive time to raise assets in the EM world. Hopefully that'll change going forward. But if we go to the next slide on performance, just to get this out of the way, if you look at the very bottom, since inception, cumulatively, the NAV after keeping aside the 30% of alpha that is the fee, no fixed management fee, and this performance fees after taking care of the operating charges, just to be clear, the trust has delivered 25% return compared to 17.5% of the benchmark. On an annualized basis, that would be 400 basis points of alpha. In partial year 23, it was 260 basis points, and 24 again was 500 plus basis points of alpha.
Obviously, while this is only a little over a year and a half or under two years of performance, we as a team have a longer track record in EM and obviously much longer in India. And all those over various time periods are a fairly strong track record, as I said, amongst the top rankings of peer group and very consistent, quite consistent as well. Now, to generate such long over long periods of time, such strong alpha, it's important to have very strong investment culture, which we'll talk about on the next slide. We can flip these slides on performance attribution. Basically, the performance attribution slides here that you see basically show that all of the alpha, whether you view it from country attribution or industry attribution, comes from stock selection. And it is very well distributed across a variety of names, as you can see on the top on the right-hand side, TSMC, obviously the big daddy, and it has done so well that it is bound to show up among the top contributors for most of the outperforming managers. But the point is really, you'll see there are several names from small caps as well, KRN, Dom Senco, Office, then there's DBS from Singapore, and you have SHX and so on, and Benefit Systems from Poland, again a smallish cap name, about a billion dollars or so or thereabout. So very wide range of alpha sources, and it'll become apparent how the team is able to tap into this inefficient segment of EM equities, particularly in small caps, once we go through the process and the strengths of the team.
So my personal forte lies in building strong investment culture on the teams that I've led over time, built or led. Yeah, we call it performance-first culture. It's some of a sports team-like mindset, the best way to describe it in short. It is a sports team-like mindset. Let's take a cricket team where the idea is to win the World Cup or to win the gold medal in Olympics terms, and we don't think of in terms of being top quartile. I think to win at any sport, you target setting is very important, goal setting is very important, and investing, in my view, I've often said, is an interesting and a serious form of sport where the game is to generate the highest return for your investors. Now, in no other sport it is acceptable to set a target of being top quartile. Yeah, if you are a swimmer or a sprinter, let's say 100-meter sprinting, and you are a teenager dedicating your time to pursuit of 100-meter sprinting, you won't set the goal of being a top quartile runner because it won't get you anywhere. Your neighborhood, 25% of your neighborhood might be running faster than you. The goal then has to be that you must aim to run below 9 seconds and beat the world record to win the gold medal and break the world record. Similarly, the teams that I've led, I would attribute the success to instilling that kind of a drive that we must deliver the highest return compared to anyone else in the peer group over any reasonable time frame. Obviously, what turns out is a function of a variety of factors, and luck is also an element of it, no doubt. But to begin with, if the goal setting is not right and you accept defeat from 25% of peer group right at the beginning, it risks bringing you down to mediocrity, and everything that you do, the effort you put in, all is impacted by that mindset.
Now there are four key elements of this culture: team, philosophy, process, portfolio construction. They have to be aligned with one another at all times. So it's a stock selection-based approach. To go with it, we have, in my biased view, the best team in the industry for stock selection of stock pickers implementing a disciplined process, something that I've had the opportunity to hone over the last 25 plus years, and all along maintain from a risk management perspective a balanced portfolio construction approach that aims to ensure that performance indeed comes from stock selection and does not get whacked around by macro bets, conscious or subconscious top-down bets. And as you saw in the performance very briefly, all of the alpha, nearly all of the alpha comes from stock selection, predominance of alpha comes from stock selection. I'm going to briefly touch upon each of these factors in the interest of time, won't elaborate too long, but if you go see the next slide, the team, it's one of the most well-resourced team in the industry. In fact, in 22, when we launched the UCITS version of our EM strategy, we started with a, I believe it was 35-member team at start, is possibly the most well-resourced startup or a most well-resourced launch of an EM strategy. Now, in brief, in the interest of time, I'll highlight three points about the team. It is, as I said, most well-resourced, 45-member team with many seasoned investors having two or three or longer decades, two or three decades or longer of experience. Second, it has vast investing experience across the world, both in emerging markets and developed world. And having invested myself for eight years in my professional capacity in developed world, I'm firmly of the belief that the developed world experience comes in very handy and very useful when investing in emerging markets as well. So that's one of, I won't say unique, but not very common to find emerging market teams where there are investors and the others besides me have considerable experience investing in developed world as well. And third, we have, by virtue of the abundance of resources that we've built on the team and which we continue to grow, we structured the team as a team within team structure where, unlike the usual team structure, which is particularly prevalent in smaller teams, which are five, ten, fifteen-member teams, where each individual on the team is exclusively covering a sliver of the investment universe, what we have here is team within team structure where each sector or industry is allotted to a sub-team within the larger team. So healthcare, for example, is a five-member global team with sector lead at the helm, and it's these sector teams who are responsible all the way from idea generation to doing the primary research, fundamental research, meeting with company managements, financial modeling, and presenting to the broader team and driving the decision making. So to recap, deep bench of seasoned resources, extensive global investing experience, EM as well as developed, and a somewhat unique team within team structure. Each of the are uniquely strong and collectively uniquely strong to equip the team to generate the kind of performance it has delivered historically.
If we go to the next slide and the slide after that, we can skip this one. And yeah, so the shared philosophy of the team is that outsize returns are earned over time by investing in great businesses at attractive valuations. Now, most managers who come on the show or you've heard probably say something similar, yeah, great business, attractive valuation. Now, as you know, you know many things that everyone may agree on and may sound simple may not be as simple to implement. And I'd love to give this favorite example where we all know that to have a healthy body, which is our top priority, we must eat well, sleep well, exercise, and have a stress-free life. Four simple things to do, but we can hardly maintain that routine beyond the first few days of January after the New Year resolution. Yeah, so just because it's simple did not mean that it is easy. And same is true for investing. What is very crucial here is day in, day out maintaining that discipline in applying this approach, and that's where a team stands out and differentiates in the process. So what we consider is great business, one that has these attributes of superior returns on incremental capital, scalable, and well-managed, both in execution and governance. These are born out of the fundamental value equation that's shown at the bottom of the slide, which is that value of any business is nothing but present value of future cash flows. To generate those cash flows, which is in the numerator, it's a prerequisite to have returns on incremental capital that are higher than cost of capital. Otherwise, there will be no sustainability to cash flow generation over time. Scalability, which is the second point, is all about the growth in that equation in the denominator. And when you have potential for superior returns and growth, you need to have strong execution DNA at the firm, at the company, to be able to deliver that over time. And above all, or first of all, adequate governance, because in the absence of adequate governance, you may have all the other attributes, and it may be a great business for controlling shareholder, but not for us as minority shareholders. The best way to make money out of such companies is to avoid them. And our team has done a fantastic job historically avoiding disaster governance disasters. Yeah, now when we find companies that possess all these attributes, it is then important to value them logically and have the discipline to invest only if and for as long as there is substantial upside to that fair value. So we are not from the school of thought that if you can buy a great business, you know, if you can buy a great business, then own it forever, and you'll do well. Maybe such approach works in delivering just above average returns or just beat the benchmark. But our aim, as I said earlier, is not nearly to beat the benchmark, but beat the best manager out there. And to that end, having strong valuation discipline, I believe, has added those extra few percentage points of return over time that makes all the difference. Having said that, we don't look at P/E multiples. Our approach is very first principles based, what we call opco-finco framework, as is outlined in the next slide. I won't go into details unless there are questions in the Q&A session. But it is an enhanced version or an adapted version of DCF, where we split the value of the company, call it ABC company, or you can think of it as a British company like Glaxo, we'll split it into finco and opco. Finco is where we assign the plant and machinery and working capital. Opco is assigned the revenue and EBITDA from which it's deemed to pay an operating lease cost and a working capital financing cost to the finco. Then, after paying tax to the government, what is left in opco is nothing but excess return on invested capital, free cash flow, because cost of capital has been paid out. So the present value of these free cash flows in opco is the value of superior return on invested capital, which is what the first point in the prior slide was. So we are quantifying the value of excess return in opco, and on the finco is nothing but invested capital. So if you look at the bottom box, enterprise value is the summation of two distinct components: the dumb invested capital, which is a very low multiple business, and the value of excess return on invested capital, which is highly valuable and can be a very high multiple component. So for over a well over a thousand companies in our EM universe, we have this through this framework when we've analyzed and evaluated them, we have this mix of value between these two components. And when you rearrange the terms of this equation, you get price to excess ROIC multiple, which is second equation, which is the value of opco divided by the cash flow of opco in any given year. And this is a lot more logical, provides very logical comparison within and across sectors than P/E multiple, because this approach normalizes for capital structure of the balance sheet as well as importantly capital intensity of the business model, neither of which is true in P/E multiples, which is why P/E multiples often provide apples to oranges or even apples to lemons kind of comparison. And this approach provides a lot more logical comparison.
So if we move on to now, we've covered the team, the philosophy, briefly touching on process. See, consistent with our thinking or goal of generating highest return for our investors, yeah, to do that you have to exploit the inefficient segments of the universe. And as we can all agree, small caps are more in emerging markets to begin with, are more inefficient than developed markets, and small caps in any markets are more efficient than the large caps. So we cast our net wide. There are over four thousand companies that are over three hundred million dollars in EM. Obviously, vast majority of them would be mid-cap and small-cap, and that's the reason to have a large and strong, highly talented investment team because one small-cap name takes more time to research and due diligence.
diligence than a large cap need, yeah. And if you make a mistake in large cap, you may lose a few percentage points or a few tens of percentage points. In small caps, they can be a disaster. So that's where, but you can add a lot of value as well if you do your job right. And to do the job right, you have to have strong talent, and to not miss out on opportunities, you have to have a large team of strong talent. So the team structure, size, and quality are all tied to the goal of top alpha generation, and this process and how we cast the net wide across the universe is also tied to the same goal.
We distill through the vast universe and end up with a portfolio of around 200 names at this time, which may sound like a high number of names to many, but I've always, throughout my career, had a very large number of names. That allows us in the portfolio to invest in far smaller cap names than might otherwise be possible in more concentrated names. And this whole structure, portfolio construction approach, is again enabled by having a large team. If you have a 10-member team, you can't run effectively a 200-name portfolio. But if you have a 40-member team or more, then 200 divided by 40 is only five names per head, very much doable. If you have a 10-member team, you'll have to keep a fraction of the names in the portfolio, and hence you'll have to, you know, forego a lot of the very exciting ideas lower down in the market cap spectrum.
If you go to the next slide, then we talk about, you know, there's a lot more detail on governance. I'll skip this and keep this for, it's very important, but I'll keep this if there are any questions. But if we go to now portfolio construction, very important, risk management. The dual objectives of portfolio construction: one is to allow the portfolio to maximize alpha, high alpha over a long period of time, and second is to minimize the volatility of that alpha in the intermittent time periods. The way we seek to achieve this dual objective is by allocating greater capital, greater amounts of capital, to alpha-rich segments of the market, and tolerating some factor risk in doing so.
Because if you're allocating more capital to certain segments of the market, that in turn would give rise to factor risks. Now, factor risks in and of themselves don't add any value, any alpha to the portfolio. In fact, they just introduce volatility. They are a zero-sum game over time. But we tolerate those factor risks where in doing so allows greater stock selection alpha generation. Now, it's somewhat complicated, but the next slide, a couple of slides, would illustrate what I'm trying to say. So if we go to the next slide, we all can agree, as I've been saying, that inefficient market segments allow for greater alpha generation for strong investment teams.
Now let me be very clear: just because a market segment is inefficient does not mean anybody can invest in that market segment and generate high returns. A strong investment team would be able to exploit the inefficiency and generate higher returns, but a poor investment team can destroy a lot of return and lose their shirt or their client's shirt as well. So it's a very important caveat to point out. But having had a long track record of exploiting greater alpha in these segments of the market, we do allocate higher capital to small and mid caps because they're more inefficient, and we tolerate the risk to a certain tolerable degree, as you'll see later, of the small and mid cap factor risk. Same way, the other factors also, where there is an alpha gradient.
If we go to the next slide, some of those factors are listed. In the interest of time, I won't go into details. But if you see on the left-hand side of this graph, the red shaded or the pink shaded one, there are factors like poor governance, macro variable-driven sectors of the market, heavily regulated sectors, and less democratic countries or authoritarian countries. In our assessment, for a variety of reasons, have lower alpha potential. On the other hand, segments of the market which are generally well-run, where business-specific variables drive value, which are lightly regulated, and in more democratic countries, there is higher alpha generation potential.
Now I again want to be clear, just like I'm not suggesting small caps would outperform large caps over time, there's no basis for such an argument. Small caps should perform in line with large cap, it's just that you can generate higher alpha in small cap. Similarly, I'm not suggesting that more democratic countries should outperform less democratic countries, or better governed companies should outperform poorly governed companies. Intuitively, that may sound like it should be the case, but that's not the premise that we are working on. It's just that the alpha opportunity is higher in such segments from stock selection, and hence we allocate higher capital.
With that in mind, if we go to the next slide, we tell you what are the market environments when our strategy may face headwinds in performance. So there are times when there's a junk rally, when poor governance segments of the market in aggregate outperform good governance segments, we would tend to have a headwind. And it is highly correlated, such environments are highly correlated with commodities, energy, utilities, government-owned companies, because these all, in an emerging markets context, these all are segments of the investable universe which have poor governance. So when they do substantially better than other segments, then it would be a headwind to us.
Similarly, when authoritarian regimes outperform democracies, and when large caps outperform small caps, these would be headwinds to us given the tilts in the portfolio. These are tilts in the portfolio, we don't have huge bets or huge risk on these, but I just want to highlight when these all combine together, it could be a headwind. So with that in mind, if we see what the portfolio looks like on the next slide, sectorally we are very well distributed across sectors, though energy and utilities we always struggle to find, you know, companies that stack up to our investment approach or investment philosophy. Energy and utilities tend to have a lot of companies that are not well governed or government-owned, and so on and so forth. Now on the bottom, but otherwise the sectors are very well invested in.
Financials is a little underweight because there's a huge part of that is because of Chinese SOE financials. If you look at the lower left-hand side, in mid and small caps we are around 20%, 18-19% overweight, as I was highlighting earlier. And then regional weights make less sense. If you go to the next slide, you'll see the country weights. And if you look at the third column, so the very first column is obviously the name of the country, but then it is the weight in the emerging markets benchmark, then the weight in the trust, and the fourth is the underweight overweight. So you'll see 6% underweight in China-HK from country of domicile, and similar underweight in Taiwan.
But we also have, as you'll see towards the bottom, we have about 13% of the portfolio in the developed world. In the developed world, the companies that we invest in typically have three characteristics, at least two of the three characteristics: one, that the predominance of their value should come from emerging markets; second, they should obviously have high alpha potential; and third, they should ideally mitigate certain factor risks in our portfolio. So China and Taiwan are factor risks, but the developed market names like Prosus, which as most of you would know is a proxy for Tencent, mitigates the China underweight. ASML and ASMI mitigate the underweight Taiwan risk.
So adjusted for that, if you look at the very rightmost column are the weights. Obviously we are overweight, and you can expect us to be almost always overweight in India, because not that we believe India would outperform, but by virtue of it being my home ground and a lot of our team's home ground, we have a home ground advantage. Just like the British team, the English team has a home ground advantage when playing in England conditions, an Indian team has a home ground advantage playing in India, as is evident with what's going on with England traveling to India right now. We have a home ground advantage and we should make full use of it. So that's the reason why we would tend to have some overweight in India.
Otherwise we would tend to have, if we go to the next slide, you'll see that in democratic countries we are overweight about 12 plus percent, and that's expected that we would have overweight in democracies and underweight of 13% in authoritarian regimes. Next slide would show that we are underweight in SOEs. Bottom right-hand side, you'll see underweight 16% in SOEs. Next slide, if we see, that shows us the top weights, top companies in the portfolio. Our semiconductor team loves TSMC, we can't own enough of it. And then there are a whole lot of other companies, some of them might be familiar names, but there are many names out there like OneSource Specialty and Inventus Knowledge and all, which are very different. One is small cap, one is mid cap, and very well positioned here in the portfolio.
If you go to the next slide, it shows now moving to EM and how it is, and we don't have very strong views on that, but for what it's worth, EM, if you look at the bottom right-hand side, on price to book is creating new historical new lows compared to historical range over the last 20 years. Compared to the average of the last 20 years, you know, it's well below that at 52% discount to the global price to book. On the lower left-hand side, you'll see in price to earnings multiple as well, it is at 39% discount to the global average. The next slide shows the price performance also, it's breaking new lows, and you'll see there as of January, below the prior lows that were set in the late '90s also.
Again, this doesn't necessarily mean that EM is bound to outperform, but it just feels to me, at least gut feel, is that it's not a bad time to be entering. The risk of dramatic loss should be lower from here, though the same assumption a few years ago would still have been wrong relative to the developed world. If we go to the next slide, EM has not always underperformed, as might be the case with the recency bias, the impression that people might have.
So if you look at this century so far, cut into two halves, the first half and the second half, you'll see on the top left-hand side, in the first half, first dozen years, EM delivered 11, 13% return compared to the world average of 3% and US, which is a darling today, only delivered 2.6% return. The next half, the second half, was the reverse. EM delivered just 3% and US has been 14% plus. So if you look at the top rightmost graph here, EM has delivered close to 8%, S&P US is 8.5%, and that is on the back of, Europe is the only one that's been moderate throughout at about 4, 4.5% or 5%.
If you look at the bottom right-hand side, it shows that EM and US in dollar terms has delivered 5.4 and 5.7% earnings growth, not materially different, contrary to what would be the impression that most people might carry given the outperformance of US in the last dozen years or so. And the dividend yield in EM is higher. So if you add up the earnings growth and dividend yield, both US and EM are smacking line. The reason US has outperformed by half a percent over the last 24 years predominantly comes from multiple expansion, which is not something you can extrapolate going forward.
So finally, if we go to the last slide, I've exceeded by a few minutes, but hopefully addressed some of the questions along the way. So to summarize, we as a team have an outstanding track record over time, particularly in EM and in single country like India. We have employed extensive resources to achieve our goal of generating highest return compared to peer group, adopting a process and approach that has served us well over time. EM appears to be at least not a bad entry point at this time. Most importantly though, it is a very alpha-rich segment of global equity markets. We bring all this to you in a best-in-class structure where we don't own anything unless we outperform, and there's full alignment of interest as we get remunerated every three years for alpha generated, not even annually, but over a three-year time for alpha generated, and we get remunerated in shares of the trust. So I'll stop at that, pause at that, and hopefully there are a few questions I can address.
