Harding Loevner Emerging Market Fund Commentary – Q2 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.
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Overview
In the second quarter of 2021, HLMEX performed roughly in line with the benchmark (MSCI Emerging Markets Index). The fund saw strong stock selection Information Technology and Consumer Staples, which contributed greatly to overall performance. Beneficial stock selection in Energy and Health Care also helped, yet no exposure to Materials and an allocation to Financials detracted from returns. Regionally, an overweight to Russia and strong selection in China and Hong Kong contributed to returns. Poor selection within the smaller EM countries, such as India and Brazil, were the largest detractors.
Q2 2021 Summary
- HLMEX returned 5.10%, while the MSCI Emerging Markets Index returned 5.05%
- Contributors
- Sector: Information Technology, Consumer Staples, Utilities, Industrials
- Region: Russia, Taiwan
- Stocks: EPAM, Eclat Textile, Sunny Optical, Silergy, Naspers
- Detractors
- Sector: Financials, Consumer Discretionary
- Region: India, Chile, Peru, Colombia
- Stocks: New Oriental, Sands China, Midea Group, Vale, Kakao
- Fund’s expense ratio dropped from 1.17% to 1.10%
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
- The fund is open but is close to its capacity limit
- Continue to invest in durable growth – quality focus with attractive valuations
- Five purchases this quarter: Meyer, NCSOFT, Sangfor, Sanhua, WuXi Biologics
[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