REEIX Commentary – Q3 2020
Thesis
REEIX is driven through both top-down and bottom-up fundamental research that provides diversification within our full EM allocation. The fund looks for high quality companies across all market caps that have strong ESG scores. We like REEIX because of the consistent and repeatable process that allows the team to take advantage of companies with sustainable growth across all the Emerging Market (EM) landscape.
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Overview
In the third quarter of 2020, REEIX underperformed the benchmark (MSCI Emerging Markets Index) by 12bps. Stock selection in South Korea detracted from performance, while stock selection in Chile, China, and India was strong. Overall allocation hurt returns, especially an overweight to Chile, yet lack of exposure to Russia was a benefit. At the sector level, allocation was a positive overall – underexposure to Energy and overweight to Consumer Discretionary. Stock selection at the sector level was mixed as the fund generated strong returns in Health Care and Financials, yet slipped in Consumer Discretionary.
Q3 2020 Summary
- REEIX returned 9.44%, while the MSCI Emerging Markets Index returned 9.56%
- Contributors
- China, Taiwan, and South Korea
- Detractors
- Latin America and EMEA
- See North Asia currencies strongly outperforming Latin America and EMEA
Outlook
- We continue to hold this fund and believe in our thesis due to the fund’s historically strong returns and understanding of Emerging Markets on both a macro and micro level
- EM performance continues to ride on the backs of “internet enabled” growth stocks and will continue for the foreseeable future
- Do expect the US dollar to weaken due to the massive stimulus, which would help bolster EM performance
- The team will continue to focus on high quality companies with strong balance sheets and cash flows
- 5 focused themes
- Domestic consumption
- Health and wellness – long term beneficiaries due to COVID
- Digitalization – will get a boost from increased online migration and connectivity
- Financialization
- Infrastructure
[Category Mutual Fund Commentary]
Micah Weinstein
Research Analyst
Direct: 617.226.0032
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109