Sarmaya Thematic ETF (LENS)

Sarmaya is an asset manager focused on emerging markets, and LENS is its flagship thematic ETF — a fund that takes a bet not on a particular country or industry, but on a set of secular trends it believes will define emerging-market growth for the next decade. The holdings are a mix of Indian tech companies, Brazilian fintech platforms, Southeast Asian e-commerce operators, and African financial-services innovators, bound together not by geography or sector but by their exposure to shared themes: digitalization, financial inclusion, and rising middle-class consumption in the developing world.

The idea behind thematic investing in emerging markets

Traditional emerging-market funds group stocks by country or economic classification — all companies headquartered in India, or all “frontier markets,” or all “small-cap growth.” This makes sense administratively and aligns with how most investors think about risk (Brazil is different from Vietnam is different from Egypt), but it often misses the more interesting story: that a digital-payments startup in Nairobi and a fintech platform in São Paulo face the same fundamental opportunity, even though one flies the Kenyan flag and the other the Brazilian.

Sarmaya’s thesis is that thematic organizing is more powerful. Emerging markets share certain structural advantages and disadvantages. Labor is cheap, making it possible to build software and financial services at lower cost than in developed countries. But they also share infrastructure gaps — many people lack access to banking, electricity is unreliable, and regulatory frameworks are still evolving. Companies that solve these gaps often repeat the same business model across multiple countries: a fintech that works in India gets cloned, tweaked, and deployed to Indonesia and the Philippines.

LENS invests around these themes. The current portfolio emphasizes digitalization (cloud infrastructure, e-commerce platforms), financial inclusion (digital banking, lending platforms that reach the unbanked), and consumer innovation (direct-to-consumer brands, health and wellness). Rather than ask “Is this company cheap?” or “Is this company growing fast?”, Sarmaya asks “Is this company riding a major structural trend?”

What makes LENS different from a standard emerging-market fund

A conventional emerging-market ETF (say, the iShares MSCI EM Index) holds the largest companies in every major developing country, weighted by market cap. Apple’s weight in a US index fund is proportional to how valuable it is; the same logic applies to emerging-market funds. This results in massive overweight to China, a meaningful Chinese internet concentration, and a portfolio that looks a lot like a big, diversified bet that “the rest of the world grows faster than it has been.”

LENS is far more concentrated and directional. Sarmaya’s investment committee actively selects companies they believe best represent each theme. This means LENS might own a 2% position in a Chennai-based cloud-infrastructure company that is no where near the top 100 companies by market cap, because the committee believes it is perfectly positioned to capture fintech’s shift toward cheaper, more reliable infrastructure. Similarly, LENS might underweight China — a traditional emerging-market heavyweight — if the committee believes China’s most interesting growth stories are already fully valued, and India or Vietnam offer better upside.

In this sense, LENS is a bet on Sarmaya’s stock-picking skill. It is not a passive index play; it is an actively managed bet on specific companies and themes.

The themes and the holdings

The fund’s current positioning emphasizes three broad areas. First is digital infrastructure: cloud services, data centers, cybersecurity companies, and telecommunications infrastructure providers across emerging Asia and Latin America. The logic is straightforward — emerging-market companies are catching up to global standards, and building out the infrastructure to do so is a multi-year, high-margin business.

Second is fintech and financial inclusion. Hundreds of millions of people in emerging markets have a mobile phone but no bank account. Companies building mobile wallets, microfinance platforms, insurance via smartphone, and frictionless lending are capturing this opportunity. The best examples are concentrated in India and Southeast Asia, but similar trends exist across Africa and Latin America.

Third is consumer innovation — companies building brands and distribution for a rising middle class. This includes e-commerce platforms, direct-to-consumer health and beauty, and food delivery services. These are high-growth but also high-competitive businesses, and LENS’s selection is based partly on the view that certain operators have better economics or network effects than others.

Holdings are typically mid-cap to large-cap companies with sufficient liquidity to trade easily in an ETF context, though some positions are smaller-cap plays where Sarmaya sees an exceptional opportunity.

How Sarmaya differentiates LENS

Sarmaya operates a small, focused team that conducts proprietary research on emerging-market trends. The fund’s performance depends entirely on whether this team is right — that is, whether their thesis about which themes matter and which companies execute them best actually plays out. In good years when the themes perform, LENS outperforms broad EM indexes. In bad years when the themes turn out to be overhyped (or when specific company bets go wrong), LENS underperforms.

The fund’s expense ratio is higher than a passive EM ETF, reflecting the cost of the investment team and active trading. This fee drag is real and can compound over time, so LENS is only justified if you believe Sarmaya’s thematic selection adds more value than its fees cost.

The risks of thematic concentration

The first risk is that LENS is a concentrated bet. It is not the “global emerging market,” it is “emerging-market growth themes as Sarmaya sees them.” In years when value or defensive stocks outperform, LENS can lag badly. In 2022, growth-focused emerging-market funds fell harder than broader EM indexes precisely because they had overweighted the fastest-growing (and most volatile) companies.

The second is binary risk on the themes themselves. If the fintech revolution in emerging markets slows — say, because regulatory backlash spreads or because competition creates a race to the bottom — several of LENS’s core holdings could face simultaneous headwinds. A concentrated portfolio has less cushion against a theme rotating out of favor.

The third is currency volatility. LENS holds stocks across multiple currencies, and the fund is denominated in whatever currency you trade it in. If you buy LENS in dollars and emerging-market currencies weaken, your unhedged foreign holdings decline in dollar terms. Some of this currency exposure is part of the thematic bet (you believe emerging markets will strengthen), but much of it is incidental volatility.

A fourth risk is manager risk. Sarmaya is smaller than the mega-cap asset managers, so the loss of key analysts or a change in investment philosophy could affect the fund’s character. There is also the “star manager” risk — if the fund’s outperformance is due to one or two particularly gifted investors, their departure is a real threat to forward returns.

Who LENS is for and how to use it

LENS is for investors willing to accept higher volatility and concentration in exchange for exposure to emerging-market growth themes they find compelling. It is not a core holding or a low-cost allocation to emerging markets; it is a satellite position for those who want a tactical tilt toward specific growth drivers.

An investor might use LENS as a supplement to a broader EM index fund, allocating 5–15% of their emerging-market allocation to thematic conviction. Or they might use it to overweight a particular region or theme if they have a strong view on where growth will come from.

To evaluate LENS, request the fund’s latest holdings list and factsheet from Sarmaya and study the actual portfolio composition — which themes are overweighted, which companies are largest positions, and what the geographic concentration looks like. Compare LENS’s performance to a broad EM index over multiple cycles: one or two years of outperformance could be luck, but five-year returns show whether Sarmaya’s thematic approach is genuinely adding value after fees. Track the fund’s expense ratio and trading costs — a small fund trading concentrated positions can have meaningful slippage. And monitor Sarmaya’s team composition; if key investment staff depart, the fund’s future performance becomes uncertain.