Highlights:
- SGA’s Emerging Markets portfolio returned -2.5% (gross) and -2.8% (net) in Q2 2018 compared to -8.0% for its primary benchmark the MSCI Emerging Markets Index; during the same period the MSCI Emerging Markets Growth Index returned -7.0% and the MSCI ACWI with EM Exposure Index returned -5.9%
- Higher U.S. interest rates and significant repatriation of funds by corporations due to tax law changes pushed the U.S. dollar higher, negatively impacting emerging market currencies
- Non-U.S. developed markets outperformed emerging markets which are more levered to currency fluctuations and restrictive trade policies; European economic growth showed signs of decelerating and markets, particularly in Latin America and Europe, faced selling pressure
- Larger-cap growth companies with higher levels of business quality were rewarded, but the reward varied significantly over the quarter
- Energy performed best followed by Health Care and Information Technology; Financials, Real Estate and Industrials performed the worst
- The portfolio benefited from strong stock selection, as well as positive sector allocation effects. Selection was strongest in the Consumer Discretionary, Information Technology, and Financials sectors
- New positions in Asian Paints and CP All were initiated, while positions in Universal Robina, SAP, and Core Laboratories were sold
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.