- SGA’s Emerging Market Portfolio returned -8.0% (gross) and -8.3% (net) in Q4 2016 compared to -4.2% for its primary benchmark, the MSCI Emerging Market Index. During the same period, the MSCI Emerging Markets Growth returned -7.1%
- Emerging markets outperformed the MSCI All Country World Index (ACWI) in the period prior to the November 8th U.S. election, but underperformed afterwards and for the quarter as the U.S. dollar and interest rates rose quickly in anticipation of reflationary U.S. policies
- SGA’s investment process faced a headwind with lesser quality businesses performing best in the quarter
- Despite the portfolio’s underperformance, it’s high business quality, superior forecast revenue and earnings growth, and greater predictability did not change; valuation did change with the portfolio’s enterprise yield improving to 3.3%
- Alibaba was purchased during the quarter while Colgate-Palmolive and Schlumberger were liquidated; other positions were trimmed and added to based on the future opportunity they were deemed to present
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.