Harding Loevner Emerging Market Fund Commentary – Q1 2021
Thesis
HLMEX utilizes fundamental research to find companies with strong quality and growth metrics that can be compared across the global landscape. By focusing on investments with competitive advantages, long-term growth potential, quality management, and corporate strength, HLMEX offers diversity to our EM allocation while generating alpha over the long run. We continue to hold the fund because of the team’s conviction in high quality companies and managed risk through diversification and evaluation.
[more]
Overview
In the first quarter of 2021, HLMEX underperformed the benchmark (MSCI Emerging Markets Index) by 57bps largely due to allocation to Financials, specifically across Latin America. Selection in Communication Services and lack of exposure to Utilities also detracted from overall performance. Energy and Information Technology on the other hand contributed to returns. Poor stock selection in India, overweight to Brazil, and lack of exposure to Saudi Arabia hurt returns. Underexposure to China and strong selection in Russia, though, helped returns.
Q1 2021 Summary
- HLMEX returned 1.72%, while the MSCI Emerging Markets Index returned 2.29%
- Contributors
- Novatek, Techtronic Industries, Hon Hai Precision, EPAM, and Lukoil
- Detractors
- Midea Group, New Oriental, Localiza, LG Household & Health Care, and CD Projekt
Outlook
- We continue to hold this fund and believe in our thesis due to the fund’s focus on quality by emphasizing earnings growth and strong cash flow to gain attractive returns over the long run
- Global determination to improve climate, especially through electric vehicles
- The fund has increased its upper limit for China and Hong Kong to the higher of China’s weight in the MSCI EM Index or 35%
- Continue to invest in durable growth – quality focus with attractive valuations
- Only purchase this quarter was CGS (Country Garden Services), a property management company
[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