Quarterly Commentaries

Asia Pacific Equity Strategy 3Q 2018

10.22.2018

Key Takeaways

 
  • In the third quarter of 2018, our Asia Pacific Equity strategy underperformed the MSCI All Country Asia Pacific ex-Japan Index. A series of market events and trends continued to weigh on the Asia Pacific region, including: higher oil prices, talk of protectionism, higher U.S. interest rates and a strong dollar. Additionally, investors were concerned over the effects of current debt levels, both at a regional scale and more broadly in emerging markets.
  • The consumer discretionary sector was the weakest sector in the benchmark and was the most significant detractor from the strategy’s attribution. Our lack of exposure to energy, the best-performing sector in the index, also contributed to negative relative returns. We are typically underweight commodity businesses, as their earnings tend to be volatile and unpredictable. Our investments in information technology supported relative returns.
  • Sensational headlines and protectionist rhetoric can cause volatility and whiplash in the markets, often leading to losses. Stabilizing mechanisms do exist, but they tend to be overlooked when perceptions of risk are high. Despite negative sentiment around investing in Asia, we do not consider it to be an impediment to our long-term strategy’s returns. We have maintained investments in our holdings where we believe their valuations are more attractive for businesses that are still growing in the double digits.
  • Over time, we believe our quality growth investment approach has consistently provided downside protection during economic turbulence, when a stock market decline is driven by recession or even collapse. This is because higher quality businesses with high returns on capital and pricing power tend to be more resilient to economic weakness than lower quality ones. Long-term conviction in these quality businesses, as well as style consistency, is vital to fulfilling our promise of quality growth.

Trailing Returns: Asia Pacific Equity Composite(As of 09.30.2018)

Calendar Year Returns

Since October 2009, results of the composite are compared to the MSCI All Country Asia Pacific ex Japan Index (Total Return Net Dividends). Prior to October 2009, results of the composite were compared to the MSCI All Country Far East ex Japan Index (Total Return Net Dividends).
Strategy name changed from Far East Equity to Asia Pacific Equity effective August 10, 2018.

Source: NorthernTrust
All results portrayed are expressed in U.S. dollars.
Past performance is not necessarily indicative of future results. For full disclosure and for further information regarding comparison to an index, see the Disclaimer and Performance Disclosure.

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