Ruchir Sharma's Breakout Launches EM Revival Fund With $250-Million Seed Capital

Ruchir Sharma-founded Breakout Capital has announced the launch of its maiden fund as it bets on emerging markets revival.

The Emerging Markets Revival Fund has received a seed capital of $250 million from "a major sovereign wealth fund", according to a statement by Sharma, the chief investment officer at Breakout Capital. The fund, he said, will invest in 30 to 50 of the "highest quality stocks in the emerging markets".

The fund reinforces Sharma's belief in emerging markets even as "pessimism" is high. The EMs are well-positioned for a revival, he said, citing that current accounts have shifted from deficits to surplus and forex reserves have expanded significantly.

"Currencies are much cheaper, and historically, currency has accounted for around 30% of total returns in emerging markets," he said. "Locals, who have superior inside knowledge, are bringing money home to many big emerging markets."

Many global investors are still "too exposed" to the winners of the 2010s and are seeking compelling new options—such as the EM Revival Fund, according to Sharma. "It is an absolute return, long-biased equity strategy that will seek to use index hedging to counter any drawdown risks."

The fund's strategic partner, Rockefeller Capital Management, provides back office and marketing support. The board of four industry veterans is anchored by Vikram Pandit, former chief executive officer at Citi.

"The core of our team has been working together in emerging markets for over two decades," said Sharma, who moved to Rockefeller International as chairman in 2022 after a 25-year career at Morgan Stanley Investment Management, where he was the head of emerging markets and chief global strategist.

Sharma called the fund's approach to stock selection "unique" in emerging markets. "We use a system of 10 rules for identifying 'breakout' nations, those likely to grow faster than their peers over the next three to five years," he said.

"Then, we scour these markets for companies that have a powerful franchise, a business model underappreciated by investors, and a high rank on quality metrics, giving them the potential to be steady compounders," he said.

The fund has an annualised target gross return of 15%, average gross exposure of 125%, and a capacity of $10 billion, according to the statement.