RBC Emerging Market Equity Fund Commentary – Q1 2021
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 first quarter of 2021, REEIX outperformed the benchmark (MSCI Emerging Markets Index) by 75bps largely due to strong stock selection and regional allocation. Exposure to Chile, Saudi Arabia, and the UAE contributed, as did the fund’s relative underweight to China. Stock selection overall contributed to returns, especially in Consumer Discretionary and Information Technology. General sector allocation delivered mixed results and exposure to Turkey, Colombia, and the Philippines detracted from returns. Stock selection within Financials also detracted from overall performance.
Q1 2021 Summary
- REEIX returned 3.04%, while the MSCI Emerging Markets Index returned 2.29%
- Contributors
- Region: Chile, Saudi Arabia, UAE, South Africa, China (underweight)
- Sector: Consumer Discretionary, Information Technology
- Detractors
- Region: Turkey, Colombia, Philippines
- Sector: Financials
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
- Possible reversal in the strength of the U.S. dollar due to aggressive balance sheet expansion by Fed, surge in US fiscal deficit, and a rally in cheaper valued asset classes
- Promising earnings and economic growth expected in the EM region
- 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 – added “Green Infrastructure” as climate change has become a larger conversation across firms
[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