Emerging Markets Equity Fund

Risk Considerations

The Fund is actively managed and invests mainly in a diversified portfolio of shares of emerging market companies.
Investment in the Fund involves risks, including general investment risk, equity market risk, risks associated with depositary receipts, exclusion criteria risk, emerging markets risk, risk associated with high volatility of equity markets in emerging countries, risk associated with regulatory/exchanges requirements of the equity markets in emerging countries, geographic concentration risk and currency risk which may result in loss of a part or the entire amount of your investment.
The Fund may use derivatives for hedging and efficient portfolio management and is subject to derivatives risk. Exposure to derivatives may lead to a risk of significant loss by the Fund.
The value of the Fund can be volatile and could go down substantially.
Investors should not invest in the Fund solely based on this website.

Investment involves risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Overview

Strategy

Fund Summary

Actively managed and invests mainly in a diversified portfolio of shares of emerging market companies.

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

30-Nov-2023 - Eric Moffett, Portfolio Manager,

Emerging markets bounced back in US dollar terms in November on the belief that major central banks are winning their battle against inflation. In Asia, Chinese equities rose as speculation that US interest rates may be near their peak offset broader concerns about the country’s slowing growth. Meanwhile, all regional markets within Latin American were positive during the month, led by the robust performance in Mexico. Within the portfolio, security choices in consumer discretionary hindered relative returns, while our overweight position also hurt to a lesser degree. Shares of a Chinese restaurant operator plunged after it missed earnings estimates in the third quarter of the year amid soft demand. The company was also challenged by rising competitive pressures from its peers. Our underweight allocation to communication services also held back relative performance. In contrast, security picks in financials benefitted, while our holdings in information technology (IT) also contributed. In IT, our off-benchmark investment in Argentinian technology-services provider added value. The company’s shares were propped up by its earnings report which showed organic growth that was ahead of the industry average. Underweighting South Korea hurt the most at the country level. Conversely, our out-of-benchmark holdings in Argentina and the Netherlands helped.

30-Nov-2023 - Eric Moffett, Portfolio Manager,

We have identified several high-quality investment opportunities in sectors including consumer staples and consumer discretionary. We have a large allocation to the former where we believe our holdings are well placed to benefit from a growing middle class in the emerging world and have the potential to achieve relatively stable levels of earnings growth over the next few years. Conversely, we have a long-standing underweight position in materials where we have typically not found many companies with the durable, longer-term, earnings growth that we seek.

30-Nov-2023 - Eric Moffett, Portfolio Manager,

We have a relatively overweight position in Brazil where we have identified a broad range of investment opportunities that are trading at attractive valuations. In our view, the growth outlook for the country this year remains positive, and we continue to identify areas of the market that we believe will be beneficiaries of its robust macroeconomic backdrop. On the other hand, we are more cautious about Taiwan, which we believe could stay weak in the near term given that it is heavily exposed to global trade.

30-Jun-2022 - Eric C. Moffett, Portfolio Manager,

We initiated a position in Southern Copper, one of the top five copper producers in the world. Half of its production base is in Mexico and the other half in Peru. The company has one of the largest copper reserve bases globally and an attractive portfolio of future projects. We believe this is a solid dividend play on copper, which is a sustainable material with solid long-term fundamentals.
We established a position in Grupo Mexico, a Mexican conglomerate with interests in copper mining, railroad transportation, and infrastructure. This is a sum-of-the-parts story that offers a resilient dividend play on copper and an opportunity for unique organic growth optionality longer term.
We added to our position in Saudi National Bank (SNB), the largest bank in Saudi Arabia by total assets. This is a high-conviction holding that delivered strong first-quarter results that beat consensus and raised its fiscal year profitability guidance target range. We believe that SNB's fundamental setup for the next few years is attractive. Our thesis on the stock continues to play out as SNB delivers on accelerating loan growth, improving net interest margins, and reducing the cost of risk.
We eliminated our position in Al Rajhi Bank, the largest Islamic bank globally. We downgraded the stock as valuations are at all-time highs. We believe there is increased potential for net interest margin compression?even with rate hikes?as the earnings downgrade cycle continues.
We sold out of Banco Santander Chile, Chile's largest bank, following strong year-to-date performance. In our view, the political landscape in Chile is becoming more risky, and we chose to eliminate our exposure to the country.
We added to our position in Localiza Rent a Car, the largest car rental company in Brazil and Latin America. We think Localiza is an exceptionally well-run company with durable competitive advantages and a focused strategy to consolidate the large and fast-growing Brazilian car rental market. Localiza's recent merger with its closest car rental rival, Unidas, is almost completed, and we believe that the combined firm will be well positioned with a long runway for growth and an attractive earnings profile.� �
We initiated a position in Centre Testing International, a provider of independent testing and inspection services for industrial and consumer products. The company has strong brand credibility and is one of China's leading service providers in this area. We think that the company's organic growth trends and margins in its food, pharmaceutical, and auto testing services are attractive and that expansion opportunities in additional industry verticals exist. Furthermore, we appreciate that the stock has high liquidity in the domestic A-shares market.
We trimmed our holding in Mexican airport Grupo Aeroportuario del Sureste, known as ASUR. This is a high-conviction name where the traffic has recovered, along with the stock. The cash flows are now solid, and they are paying dividends. Due to the lack of further concessions, however, we wanted to manage position size to balance some structural growth concerns in the medium term.
We trimmed Alibaba Group Holding, a Chinese multinational technology company specializing in e-commerce, retail, the internet, and technology, to manage position size during the quarter. Although Alibaba's core China e-commerce marketplace business is under pressure in the near term from increased competition, regulation, and cyclical factors, we remain favorable on the stock, as we expect the business to recover in the coming year.
We eliminated our holding in MercadoLibre, the largest online trading platform in Latin America. There are signs of online growth slowing in the near term based on higher spending and taxes, which will likely increase volatility.

30-Jun-2022 - Eric C. Moffett, Portfolio Manager,

Yum China Holdings is the country's largest restaurant company and operator of the KFC, Pizza Hut, and Taco Bell chains. Shares advanced after the firm released first-quarter earnings that were in line with the modified expectations that were reset in the firm's March profit warning. Notably, the results showed that the underlying fundamentals of the business remain solid despite the significant short-term disruptions from China's zero-COVID policy with store openings on track and stable store payback rates. We believe that Yum China's healthy balance sheet and increasing commitment to return value to shareholders through a high level of cash payouts in the form of buybacks and dividends provide a valuation floor.�Further, we think that Yum China's strong competitive position, coupled with its management team's solid executional track record, position the firm well to navigate through the current pandemic challenges and capture share as demand recovers.
Zhejiang Sanhua Intelligent Controls also aided relative outperformance. Sanhua is an industrial parts supplier that sells complex thermal management components used in electric vehicle batteries and home appliances. Shares rose after Sanhua released solid first-quarter business results in April that were ahead of consensus for both revenues and net income. Sales in the auto component segment benefited from the strong trends for electric vehicles, while signs of a turnaround in China's property market boosted demand for Sanhua's thermal controls used in high-efficiency home air conditioners.
Along with solid contribution from Yum China Holdings, our holding in Chinese shopping platform Meituan added value. Shares advanced after the firm released first-quarter earnings that beat expectations and showed strong year-over-year revenue growth as their food delivery revenue has remained resilient during the lockdown. While we expect some near-term earnings volatility, we believe Meituan offers two strong, attractive growth engines. Its in-store business captures the monetization potential to bring online users to offline services, while its leading position in food delivery offers advantages in a benign competition environment.
The stock price of Brazil-based BM&FBOVESPA (B3) saw a decent correction following their peak in early April. B3, Latin America's largest cash equities, derivatives exchange, and depositary company, posted underwhelming earnings as capital market activity in Brazil remains depressed.�Despite the challenging macro outlook in Brazil, we remain attracted to the quality of B3's core business, along with its high barriers to entry, impressive margins, and high cash generation/dividend distribution profile. We believe that the firm is also well positioned to benefit from secular growth in the adoption of structured products as Brazilian capital markets develop over time.�
B3 was the largest detractor in the country during the quarter.
Additionally, our holding in Rede D Or Sao Luiz, Brazil's largest hospital operator, detracted, as shares declined alongside the broader Brazilian market pullback and a slight first-quarter earnings miss. Although the near-term environment may be choppy, we continue to believe that Rede D Or Sao Luiz can deliver attractive, durable earnings growth, as it is well positioned with scale, market share, and strong management to consolidate a fragmented and inefficient industry.

Disclosure on Vendor Indices can be found here.

Risks

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