- SGA’s Emerging Markets Growth portfolio returned 11.2% (gross) and 10.9% (net) in Q3 2020 compared to 9.6% for its primary benchmark the MSCI Emerging Markets Index; during the same period the MSCI Emerging Markets Growth Index returned 14.2%.
- Asian markets performed strongly, while Latin America and emerging economies in Europe markets lagged.
- Discretionary and Technology stocks outperformed, driven by continued strength in online retailers and also due to rebounds in more cyclical areas like autos and semiconductors. Companies in the Utilities, Financials, and Energy sectors lagged.
- Stock selection detracted modestly from relative results, while residual sector allocations contributed positively. An overweight in the strongly performing Consumer Discretionary sector and a lack of exposure to Energy companies contributed most, while an underweight in the Information Technology sector and overweight in the Consumer Staples sector detracted. Selection outside of Consumer Discretionary and Consumer Staples contributed positively.
- A new position in Brazilian broker platform XP was initiated while positions in CP All, FEMSA, and Fast Retailing were added to on weakness; positions in Alibaba, Asian Paints, Huazhu Group, Shandong Weigao, MercadoLibre, and Kakao were trimmed on strength.
- The portfolio is expected to generate higher revenue and earnings growth than the MSCI EM Index over the coming three years with greater predictability and sustainability.
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.