Highly innovative companies outperformed again in May, continuing a streak that has been going on for quite awhile now. Whether in the developed markets or emerging markets, Knowledge Leaders have outperformed the broad DM and EM benchmarks over the last month, quarter, YTD, 1-year and since the inception of our Gavekal Knowledge Leaders Indexes.

In the first four charts below we show the performance of our Knowledge Leaders Index vs the respective MSCI Total Return Index in USD over various time periods. From left to right in each chart is the Knowledge Leaders DM Index (dark blue), MSCI World Index (red), Knowledge Leaders EM Index (light blue), and MSCI EM Index (black). In the last two charts we show the since inception performance of the Gavekal Knowledge Leaders Indexes vs their respective DM and EM broad equity indexes. Generally the trends are as follows: 1) Knowledge Leaders in DM and EM outperform the broad market and 2) DM outperforms EM.

The takeaway is simple: the market is allocating far more capital towards knowledge intensive firms than towards firms with a knowledge deficit, heightening the stakes for investors to identify and invest in highly innovative companies wherever they can be found.

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