Diversified exposure to emerging markets, capturing value and growth

The Fund normally invests at least 80% of its total assets in equity securities of companies located in emerging markets and investments that are tied economically to emerging markets, such as common stock, preferred and preference stock, depositary receipts, including American Depositary Receipts, Global Depositary Receipts, European Depositary Receipts, Swedish Depositary Receipts and other types of depositary receipts, real estate investment trusts (“REITs”) and exchange-traded funds (“ETFs”) that invest in emerging markets securities. The Investment Manager primarily invests in common stock, but will use those other security types referred to above if, for example, they provide greater liquidity, the Fund cannot access common stock through a local market, or the yield rate of preferred or preference stock is deemed favourable. Typically, less than 10% of the Fund’s Net Asset Value will be invested in ETFs, and investment in ETFs will be limited to 15% of the Fund’s Net Asset Value.

The Fund generally invests in companies with market capitalisations of US$500 million or greater at the time of investment. However, the Fund may invest in smaller market capitalisation companies if, based on the quantitative investment approach described below, it finds an attractive investment with a lower market capitalisation and sufficient liquidity. The Fund may invest in any industry or sector, but generally will not invest more than 25% of its total assets in the equity securities of companies in a single industry. Typically, the Fund will hold a diversified portfolio of over 80 equity securities.

The Investment Manager uses a quantitative investment approach to purchase and sell equity securities and those other investments as detailed above for the Fund. The Investment Manager’s quantitative investment approach uses a proprietary computer model that analyses historical financial data, or “factors,” to assist in selecting investments as detailed above. The model currently analyses “stock specific” factors relating to valuation, growth, technical indicators (such as stock price momentum), competitive strength, and “top-down” factors relating to macroeconomics, currency, country and economic sector. Currently, the valuation factor category receives the highest overall weight in the model and stock-specific factors comprise approximately 75% of the score for a company. For each stock, the relative weight assigned to each stock-specific factor differs depending on its classification (for example, value, growth, momentum, capitalisation or other classifications). The relative weights of these stock-specific factors are sometimes referred to as “contextual weights.”. As the Investment Manager is continually seeking to improve model performance, the factors and their weightings in the model may change over time, or if the classification of a stock changes. By ranking companies based on a combination of these factors, the Investment Manager seeks to identify a portfolio of investments that will outperform the MSCI EM Index. In addition to its quantitative research, the Investment Manager’s fundamental research analysts review the quantitative outputs to attempt to identify and address special issues, such as significant corporate actions or management changes, which are difficult to detect quantitatively.

Please see the Prospectus and Supplement for more information. Please contact [email protected] for a Fund Application.

Nav*
€15.05
Inception
February 10, 2016
ISIN
IE00BWT3P209
Benchmark
MSCI Emerging Markets in EUR
Minimum investment
€1,000,000
Total expense ratio
1.24%
*As of December 01, 2022
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Strategy overview

The portfolio managers discuss our Emerging Markets strategy.

Portfolio managers

Quantitative Portfolio Manager
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTD YTD 1 year3 years Since inception
Fund -3.5%-19.3%-19.0%-1.3%5.3%
MSCI Emerging Markets in EUR -3.9%-18.5%-18.9%-0.1%7.1%
QTD YTD 1 year3 years Since inception
Fund -3.5%-19.3%-19.0%-1.3%5.3%
MSCI Emerging Markets in EUR -3.9%-18.5%-18.9%-0.1%7.1%
20212020201920182017
Fund N/AN/AN/AN/AN/A
MSCI Emerging Markets in EUR N/AN/AN/AN/AN/A
20212020201920182017
Fund N/AN/AN/AN/AN/A
MSCI Emerging Markets in EUR N/AN/AN/AN/AN/A

Portfolio (as of October 31, 2022)

Benchmark:
Asset Allocation
Fund
Stocks 98.2%
Cash 1.8%
Fund Characteristics
Fund Benchmark
Holdings 185 1386
Weighted avg. market cap (US $MM) $41,455 $46,255
NTM price/earnings 6.1 9.9
Price/book value 1.0 1.5
NTM EPS revision (wtd. avg.) 2.17 -6.57
Net assets $2,406,957.47 -
TOP 10 ACTIVE HOLDINGS
Security Country Active weight*
China Construction Bank Corp. China 1.9%
Banco do Brasil SA Brazil 1.7%
PICC Property & Casualty Co., Ltd. China 1.2%
Kia Corp. South Korea 1.2%
Sun Pharmaceutical Industries Ltd. India 1.1%
PetroChina Co., Ltd. China 1.1%
Hon Hai Precision Industry Co., Ltd. Taiwan 1.1%
Hana Financial Group, Inc. South Korea 0.9%
Tongwei Co China 0.9%
Oil & Natural Gas Corp. Ltd. India 0.9%

A "weighted average” measures a characteristic by the market capitalization of each stock. Price/book ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The price/earnings ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. “Earnings-per-share” is the portion of a company’s profit allocated to each outstanding share of common stock. “Earnings-per-share year-over-year estimate growth (next 12 months)” is the average next-12-months earnings-per-share estimate from one year ago for an individual company compared with that estimate today; note that this calculation is done on a company-by-company basis and is aggregated through a weighted average based on the individual company’s weight in the corresponding index. Also note that this characteristic is supplied directly by MSCI.

*Active defined as Fund weight minus MSCI EM Index weight. Holdings are subject to change.

SECTOR WEIGHTS
Sector Fund Benchmark
Financials 21.8% 23.6%
Information Technology 18.1% 19.1%
Consumer Discretionary 10.9% 12.3%
Energy 10.0% 5.6%
Industrials 10.0% 6.1%
Materials 9.5% 9.1%
Consumer Staples 6.7% 6.5%
Health Care 4.5% 4.1%
Communication Services 4.4% 8.7%
Utilities 1.9% 3.2%
Real Estate 0.4% 1.7%
TOP 10 COUNTRIES
Country Strategy Benchmark
China 28.5% 26.9%
India 16.6% 16.2%
South Korea 12.9% 11.9%
Taiwan 12.4% 13.5%
Brazil 6.6% 6.4%
Saudi Arabia 5.9% 5.1%
Thailand 3.3% 2.2%
Indonesia 3.2% 2.3%
United Arab Emirates 3.0% 1.5%
South Africa 2.0% 3.7%
Regional Allocation
  • Emerging Asia 76.8%
  • Emerging Europe, Middle East, Africa 13.2%
  • Emerging Latin America 8.2%

Commentary (As of October 31, 2022)

Highlights

  • Market volatility in China and continued rising interest rates across several markets weighed on emerging market (“EM”) equities in October.
  • In October, we adjusted our earnings growth factor to, in our view, better reflect sentiment for commodity-related stocks. Based on our research, sell-side analyst earnings revisions for this cohort of stocks may be inconsistent with the price movement of the underlying commodities. In some cases, analysts are slow to update estimates, while in other cases, analysts base their forecasts on forward contracts, which adjust with a lag compared to spot prices.
  • While we incorporate growth expectations into our multi-factor investment process, we continue to emphasize valuation in our approach. With a balance of favorable valuation, growth, and price momentum characteristics relative to the Index, we believe the portfolio offers attractive risk-adjusted return potential looking forward.

Portfolio Attribution

The Fund outperformed the Index in October 2022. We use both bottom-up “stock-specific” and top-down factor categories to seek to forecast alpha for the stocks in the Portfolio’s investable universe. Our bottom-up growth and technical factors were positive indicators during the month. Our valuation and competitive strength factors were negative. Of our top-down factors, sector was a positive indicator. Our currency, macroeconomic, and country factors were negative indicators in October.

Investment Outlook

Earnings growth upgrades for EM equities continue to lag those in ex-US developed markets. The EM sectors with the weakest net upgrades were materials, communication services, and industrials. Slowing global growth has contributed to lower expectations for industrials, which reflect weakness in the shipping sector, and materials companies. Communication services is primarily driven by the Chinese platform companies, which have been impacted by the country’s slowing growth. Sectors with positive net upgrades were financials and energy. Financials are benefitting from positive credit cycles in India and Brazil, countries where we are identifying attractive investment opportunities in banks. The energy sector has been buoyed by oil, coal, and natural gas prices, which remain relatively strong. From a country perspective, South Korea, South Africa, and China had the weakest net upgrades. The export-dependent, technology-oriented South Korean economy has been impacted by slowing global growth. South Africa is a commodity-oriented economy and reflects the falling commodity prices. Covid-19 restrictions continue to slow growth in China. While we incorporate growth expectations into our multi-factor investment process, we continue to emphasize valuation in our approach. With a balance of favorable valuation, growth, and price momentum characteristics relative to the Index, we believe the portfolio offers attractive risk-adjusted return potential looking forward.

In October, we adjusted our earnings growth factor to, in our view, better reflect sentiment for commodity-related stocks. Based on our research, sell-side analyst earnings revisions for this cohort of stocks may be inconsistent with the price movement of the underlying commodities. In some cases, analysts are slow to update estimates, while in other cases, analysts base their forecasts on forward contracts, which adjust with a lag compared to spot prices. Additionally, extreme movements in commodity prices are often met with supply and demand responses, resulting in price reversals. For these reasons, we believe that adjusting our earnings growth factor for commodity-related stocks can potentially improve the Portfolio’s risk-adjusted returns.

The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the Fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Diversification does not protect against market loss. Current and future holdings are subject to risk.

Documents

Fund information: