BEXIX Commentary – Q4 2019
Thesis
BEXIX is driven through bottom-up fundamental research that provides diversification within our full EM allocation. The fund looks for growth companies across all market caps that have a sustainable competitive advantage. We like BEXIX because the team takes advantage of companies that focus on consumer business and technological advancements, helping the fund produce returns above the benchmark (MSCI Emerging Markets Index).
Overview
In the last quarter of 2019, BEXIX underperformed the benchmark (MSCI Emerging Markets Index) by 2.31% due to both poor stock selection and relative country weights, yet slightly outperformed (44bps) for the entire year. As progress was made on the U.S.-China trade deal, EM outperformed the U.S. and global indexes for the quarter. As trade compromise likely increases, the fund managers will look to take advantage of the expected growth for EM and international equities.
Q4 2019 Summary
– BEXIX returned 9.53%, while the MSCI Emerging Markets Index returned 11.84%
– New investments made
o Two private sector companies in China – construction and medical
o A position in the automation and robotics world in Japan
o A position to the infrastructure industry in Mexico
o Established a position in an exploration and production company focused on developing oil and gas fields in China
– Holdings that were sold
o Two holdings in India – housing and consumer credit
o A 5G holding in China
o A 5G based investment in Finland
o An energy holding based in China
o An oil firm based in London
Optimistic Outlook
– We continue to hold this fund and believe in our thesis due to the fund’s historically strong returns and optimism around the settling of trade frictions, giving opportunity to growth-based investments in the EM market
– Going forward BEXIX believes that Brazil, China, and India will be standouts as global tensions decrease and markets recover
– U.S. dollar will have a longer-term peak which will support sustainability and outperformance for the EM and international markets
– EM markets are bottoming on a relative return basis which will potentially lead to strong outperformance in the future
[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