- SGA’s Emerging Markets portfolio returned 10.3% (gross) and 10.0% (net) in Q1 2017 compared to 11.4% for its primary benchmark the MSCI Emerging Markets Index; during the same period the MSCI Emerging Markets Growth Index returned 12.8% and the MSCI ACWI with EM Exposure Index returned 11.0%
- Emerging markets performed best followed by developed markets outside the U.S.; Emerging Asia, Latin America and Asia Pacific ex-Japan were the best performing regions
- Stock indexes generated strong absolute returns on investor optimism that global economic growth would strengthen, improved economic data in Europe and signs that recent populist movements may have peaked
- Strong pro-cyclical headwinds from Q4 2016 were replaced by broader large cap growth leadership; business quality factors were generally positive as companies with earnings, higher ROE’s, and lower debt performed better
- Technology, Industrial, Consumer Discretionary, and Materials sectors outperformed while the Energy sector performed weakest due to concerns over building inventories and whether OPEC would respect previously announced production cuts
- SGA’s performance was hurt most by an overweight to, and stock selection in, the Consumer Staples sector
- Shandong Weigao was sold to fund a more attractive growth opportunity in Sinopharm while a position in MercadoLibre was trimmed on strength and a position in Kansas City Southern was added to on weakness
The opinions expressed herein reflect the opinions of Sustainable Growth Advisers, LP and are subject to change without notice. Past performance is no guarantee for future results. This information is supplemental and complements a full disclosure presentation that can be found with composite performance. The securities referenced in the article are not a solicitation or recommendation to buy, sell or hold securities. This commentary is provided only for qualified and sophisticated institutional investors. SGA earnings growth forecasts are based upon portfolio companies’ non-GAAP operating earnings. SGA Emerging Markets Growth Composite inception is 8/1/2014.
Results are presented gross and net of management fees and include the reinvestment of all income. The Net Returns are calculated based upon the highest published fees. The net performance has been reduced by the amount of the highest published fee that may be charged to SGA clients, 1.1%, employing the Emerging Markets Growth equity strategy during the period under consideration. Actual fees charged to clients may vary depending on, among other things, the applicable fees schedule and portfolio size. SGA’s fees are available upon request and also may be found in Part 2A of its Form ADV. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Upon request, free of charge, SGA can provide a list of all portfolio holdings held in SGA’s Emerging Markets portfolio for the past year. Past performance is not indicative of future results.