• SGA’s Emerging Markets Growth portfolio returned 22.2% (gross) and 21.9% (net) in Q2 2020 compared to 18.1% for its primary benchmark the MSCI Emerging Markets Index; during the same period the MSCI Emerging Markets Growth Index returned 22.1%.
• The portfolio delivered attractive absolute and relative returns as markets rebounded in Q2, with the portfolio erasing nearly all of the losses incurred during the Q1 weakness. Year-to-date the portfolio has returned -0.1% (gross) and 0.6% (net) compared to -9.8% for the MSCI Emerging Markets Index and -1.5% for the MSCI Emerging Markets Growth Index.
• Stock selection drove the portfolio’s outperformance during the period, while sector allocations detracted marginally.
• New positions in Kakao and Kansas City Southern were initiated, while positions in Ambev and Heineken were liquidated. Positions in AIA Group, Asian Paints, Budweiser APAC, HDFC Bank and Infosys were added to on weakness, while positions in Huazhu Group, JD.com, MercadoLibre, and Shandong Weigao were trimmed on strength.
• Given the superior business quality and predictability of our companies, the portfolio is expected to generate significantly greater revenue and earnings growth than the MSCI EM Index over the coming three years despite significant uncertainties over the pandemic, economic growth, and other uncertainties.
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.