Emerging Markets. Quarterly Review. Composite Performance. Quarterly Top Relative Contributors and Detractors

Transcription

1 Cumulative Excess Return % Return % Emerging Markets Quarterly Review Composite Performance Periods Ending 31 March 2018 At A Glance Inception: 1 November Qtr 1 1 Year 3 Year 5 Year 10 Year Benchmark: MSCI Emerging Markets AUM: $3.74 billion USD Emerging Markets Gross of Fees MSCI Emerging Markets The value of investments can fluctuate. Data assumes reinvestment of dividends and capital gains. Data reflects past performance. Past performance does not guarantee future results. Periods greater than one year have been annualized. Quarterly Top Relative Contributors and Detractors Contributor Detractor China Gas Holdings Ltd 0.25 Vakrangee Ltd Medy-Tox Inc 0.24 Mando Corp Magazine Luiza SA 0.22 Brilliance China Automotive Holdings Ltd Sunny Optical Technology Group Co Ltd 0.21 China Construction Bank Corp China Resources Beer Holdings Co Ltd 0.20 Taiwan Paiho Ltd Attribution Analysis One Year Ending 31 March Sector Allocation Security Selection Currency Effect Total Effect

2 Investing With a Time-Tested Growth Philosophy We believe that accelerating growth in revenues and earnings results in significant potential for stock price appreciation. markets are inefficient at identifying such points. Our process is designed to uncover stocks that outperform as earnings growth accelerates, market expectations rise and multiples expand. Goal Seeks to outperform the MSCI EM Index by 2% to 3% annualized over a market cycle. Risk Guidelines Maximum position size: 3% active weight Regional exposure: +/- 10% of benchmark weight Sector exposure: +/- 10% of benchmark weight Expected tracking error: 3% to 5% versus benchmark Investment Process 1 2 Fundamental 3 Investment Universe Market capitalization > $500M Daily trading liquidity > $4mm Idea Generation Identify companies exhibiting accelerating growth and improving fundamentals Fundamental information flow Quantitative screens Analysis Confirm acceleration is genuine and sustainable Construction Focus portfolio on best ideas Monitor risk controls and guidelines 1,200 Companies Companies Companies Companies 2

3 Characteristics Characteristics Benchmark Weighted Average Market Capitalization $59.5 B $56.7 B Median Market Capitalization $5.7 B $3.0 B Price To Earnings Ratio, Historical 1 Year 18.2x 14.1x Price To Earnings Ratio, Forecasted 1 Year 14.6x 12.5x EPS Growth, Historical 1 Year 33.0% 25.9% EPS Growth, Forecasted 1 Year 25.2% 18.5% Number of Holdings Number of Countries Turnover, Trailing 1 Year 41% N/A % Cash 2.3% 0.0% Forecasts are not a reliable indicator of future performance. Investment Team Managers - Patricia Ribeiro - Sherwin Soo, CFA Client Managers - Nathan Chaudoin - Bernard Chua, CFA - Laura Granger, CFA - Jim Shore, CFA 5 Investment Analysts Located in New York Top 10 Holdings Holding Country Industry Assets Tencent Holdings Ltd China Internet Software & Services 5.71 Samsung Electronics Co Ltd Taiwan Semiconductor Manufacturing Co Ltd South Korea Taiwan Technology Hardware Storage & Peripherals Semiconductors & Semiconductor Equipment Alibaba Group Holding Ltd China Internet Software & Services 4.12 Industrial & Commercial Bank of China Ltd China Banks 2.46 Naspers Ltd South Africa Media 2.10 Ping An Insurance Group Co of China Ltd China Insurance 1.97 Ambev SA Brazil Beverages 1.86 Sberbank of Russia Russia Banks 1.86 China Construction Bank Corp China Banks 1.83 Total 30.52% Top 10 Overweights Holding Weight Benchmark Weight Overweight HDFC Bank Ltd NMC Health PLC Industrial & Commercial Bank of China Ltd Magazine Luiza SA Novatek PJSC Ambev SA Globalwafers Co Ltd China Resources Beer Holdings Co Ltd OTP Bank PLC Hana Financial Group Inc Equity holdings are grouped to include common shares, depository receipts, rights and warrants issued by the same company. holdings subject to change without notice. 3

4 Sector Allocation Weight vs. Benchmark Sector Benchmark Consumer Discretionary Consumer Staples Diversified Financials Health Care Information Technology Real Estate Industrials Utilities Telecommunication Services Energy Materials % Quarterly Sector Performance Contribution to Return vs. Benchmark Sector Contribution to Return Contribution to Benchmark Return Consumer Staples Information Technology Industrials Health Care Materials Utilities Telecommunication Services Diversified Real Estate Energy Financials Consumer Discretionary % When shown, "Diversified" includes portfolio holdings that cannot be attributed to a specific GICS sector. 4

5 Country Allocation: Top 10 Over/Underweights Weight vs. Benchmark Country China Brazil Thailand Russia United Kingdom Hungary Czech Republic Peru Indonesia Egypt Benchmark Colombia Qatar United Arab Emirates Mexico Poland Malaysia Taiwan South Africa India South Korea % Quarterly Top Relative Contributors and Detractors by Country Contributor Brazil 0.33 China 0.31 India 0.23 Mexico 0.18 United Kingdom 0.18 Detractor Taiwan South Korea Turkey Thailand Chile

6 Percentile Rank Emerging Markets Risk-Adjusted Performance Three-Year MPT Statistics vs. ea Emerging Markets All Cap Equity Universe vs. MSCI EM-ND, Citigroup 3-Month T-Bill 0 Excess Returns Tracking Error Information Ratio Sharpe Ratio 25 Median Emerging Markets Excess Returns Tracking Error Information Ratio Sharpe Ratio Manager Percentile Rank Median Source: evestment Analytics Excess returns are gross of fees. Number of products in the universe was 208. Available Vehicles Separate Account Available in U.S. and certain non-u.s. countries. SICAV Emerging Markets Equity Available only in certain non-u.s. countries. 6

7 Quarterly Commentary Review Emerging markets positive, outperforming developed markets in tough quarter. Emerging markets stocks rallied to start the year with global economic tailwinds and improving fundamentals but retreated later in the period along with global stocks as slowing growth momentum and a weaker dollar weighed on investor confidence. News of higher U.S. trade tariffs and a potential U.S.-China trade war also dominated the news flow in February and March, adding to market volatility. Despite the slump in stocks, emerging markets earnings growth estimates for 2018 were revised upward. We remain bullish on emerging markets stocks. Conditions continue to strengthen over the medium term. An above-trend global growth outlook, widening premium of emerging markets GDP over developed markets through 2018, ongoing upward earnings revisions, and attractive valuations versus developed markets all support a bullish outlook for emerging markets equities, in our view. Beer maker gained on China premiumization trend. Rebranding of its mid- to high-end beer brands has allowed China Resources Beer Holdings to gradually raise prices and launch new products in higher-end markets. These price hikes are also supporting profit growth and profitability. Lens maker grows beyond smartphones. Sunny Optical Technology Group benefited from increased market share and improved margins as well as expansion in vehicle, surveillance, drone, and robotics cameras. Automotive component supplier declined amid sluggish car sales. Automotive parts manufacturer Mando was pressured after sluggish sales growth for prominent customer Hyundai Motor Group led to downward earnings revisions. We remain positive on the stock amid increasing safety requirements for automakers. Improving economic conditions creating opportunities in financials. Improving profitability and asset quality are driving growth among emerging markets financials such as Chailease Holding, which was a new purchase during the quarter. Mexico exposure increased. Our increased exposure in Mexico included our purchase of telecommunications company America Movil. Our investment thesis for the Key Contributors China Gas Holdings. An increase in the number of rural households in China connecting to natural gas drove sales growth for China Gas Holdings during the period. The natural gas company reported stronger earnings growth and better-than-expected net profits. Medy-Tox. The biopharmaceutical firm reported strong quarterly financial results and continued to gain market share. The South Korea-based company is seeking entry into the Chinese market, where the market for anti-wrinkle injections is considerably larger, competition is limited, and pricing is higher. Magazine Luiza. The furniture and appliance retailer reported strong quarterly financial results that included higher-than-expected sales and top-line growth. The company continues to increase market share and to transform into an omnichannel digital platform. New stores are also performing well. Key Detractors Vakrangee. The stock of the provider of government-tocitizen services, real-time banking services and assisted e- commerce in India declined on allegations of share price and volume manipulation. Against a backdrop of increased corporate governance risk in India, we exited the position. Mando. declined after Hyundai Motor Group reported sluggish sales growth in China. Given that Mando is a major supplier to Hyundai, the market expects it to miss first-quarter 2018 estimates. We believe earnings will recover and that automobile safety requirements will support future growth. Brilliance China Automotive Holdings. Despite rising consumption in China and localized production of the on weaker-than-expected 2017 earnings. Other headwinds included concerns about tariffs, competition, and increased spending on electric vehicles. Notable Trades China Construction Bank. We initiated a position in China Construction Bank due to its strong funding franchise and a positive outlook for its net interest margins. We expect asset quality improvement to continue in the near term. Mexico- and Brazil-based mobile operations, which are seeing higher mobile growth coupled with cost savings. 7

8 Globalwafers. New buys included Globalwafers, a manufacturer of semiconductor rods and wafers. We believe a secular upturn in silicon wafer fabrication bodes well for the company and that gradual price increases will support margins. Globalwafers has signed a number of long-term client contracts, which has lengthened order visibility. Multiplan Empreendimentos Imobiliarios. The shopping mall developer reported disappointing fourth-quarter 2017 financial results, including lower top-line growth due to a slower-than-expected store maturation and more conservative assumptions regarding parking revenue growth. We subsequently liquidated our position in the stock. Kroton Educacional. We sold our stake in education company Kroton Educacional on the back of a weaker intake cycle and limited growth prospects. We expect the increased competition in distance learning. Positioning for the Future The portfolio continues to invest in companies where we believe the fundamentals are strong and improving but share price performance does not fully reflect these factors. Our process is based on individual security selection, but broad themes have emerged. stocks. While we reduced our sector exposure overall, we added to positions in retail, education, and hospitality names. Beverage makers drove consumer staples overweight. Buoyed by increasing demand for favored brands and convenience, beverage makers China Resources Beer Holdings and Ambev, as well as convenience store operator CP ALL, contributed to our consumer staples overweight. Identifying opportunities in financials. We increased our exposure to financials where we are finding opportunities in emerging markets banks that are benefiting as profitability and asset quality improve. Lithium prices pressured chemicals company. We reduced our materials exposure, liquidating our position in Sociedad Quimica y Minera of lithium is facing significant downside risk to the lithium price. We expect prices to peak and begin to decline as demand growth falls far short of what is needed to absorb the sharp supply increases. Latin America exposure increased. We added to our exposure in Latin America, initiating new positions in Mexico-based telecommunications company America Movil, Chile-based retailer SACI Falabella, and Brazilbased petroleum derivatives and biofuels distributor Petrobras Distribuidora. Improving consumer activity creating opportunities. Strength in emerging markets consumer activity contributed to our overweight in consumer discretionary 8

9 This document does not constitute an offer or solicitation to invest in shares of the fund. The fund may not be licensed in all jurisdictions, and unless otherwise indicated, no regulator or government authority has reviewed this document or the merits of the shares referenced herein. This document is provided on a privileged and confidential basis and, where required by local law, at the request of the recipient. This document (and the information contained herein) is for informational purposes only and is not to be reproduced, distributed or transmitted without the written consent of American Century Investment Management (UK) Limited. If you receive a copy of this document, you may not treat this as constituting a public offering and you should note that there may be restrictions or limitations to whom these materials may be made available. You should conduct appropriate checks to ensure that these materials are made available only to eligible recipients, pursuant to private placement exemptions, or are otherwise used in accordance with applicable law. If you wish to apply to purchase shares of the fund, it is your duty to inform yourself of, and to observe, all applicable laws and regulations of any relevant jurisdiction. In particular, you should inform yourself as to the legal requirements of so applying, and any applicable exchange control regulations and taxes in the countries of your respective citizenship, residence or domicile as well as any other requisite governmental or other consents or formalities which you might encounter which might be relevant to your purchase, holding or disposal of shares. Past performance is no indication as to future performance and the value of any investment may fall as well as rise. Any investment in shares of the fund is done at the investor's own risk. Certain Funds have been authorised for sale in Austria, Finland, Germany, Iceland, Italy, Luxembourg, the Netherlands, Spain, Sweden, Switzerland and the UK. For more details, refer to the relevant Fund's KIID. This communication is intended only for persons resident in jurisdictions where its distribution and availability would not be contrary to local laws. This promotion has been approved with limitations, in accordance with Section 21 of the Financial Services and Markets Act, by American Century Investment Management (UK) Limited, which is authorised and regulated by the Financial Conduct Authority. This information is meant to be communicated to and/or directed at only those persons who are categorised as professional clients or eligible counterparties in relation to the fund, and other persons should not act or rely on it. American Century Investment Management (UK) Limited is registered in England and Wales. Registered number: Registered office: 12 Henrietta St, 4th Floor, London WC2E 8LH. The current version of the full prospectus and Key Investor Information Document are available in English, German and Icelandic and can be obtained free of charge by contacting American Century Luxembourg, Grand Duchy of Luxembourg, or at American Century Investment Management (Asia Pacific), Limited currently holds Type 1 and Type 4 registrations from the Securiti Management, Inc. is not registered with the SFC. This fund is not available for sale in the U.S. and nothing herein shall be construed as an offer to sell in the U.S. or to U.S. persons. This promotion is not intended for public distribution and may only be distributed on a non-public offering basis. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. the number Composite returns are gross of investment management fees. Sector weights, portfolio characteristics and holdings are of a representative account in the composite. Holdings are current as of the date indicated, are subject to change and may not reflect the portfolio's current holdings. construction guidelines document operational policies and not necessarily investment restrictions imposed on management of the strategy. Material presented has been derived from industry sources considered to be reliable, but their accuracy and completeness cannot be guaranteed. Opinions expressed are those of the portfolio investment team and are no guarantee of the future performance of any portfolio. Nothing in this document should be construed as offering investment advice. Please note that this is for informational purposes only and does not take into account whether an investment is suitable or appropriate for a specific investor. For purposes of compliance with the Global Investment Performance Standards (GIPS with the Global Investment Performance Standards (GIPS ). Emerging Markets composite includes portfolios that invest in the equity of large, medium and small capitalization non-u.s. companies in emerging markets that are demonstrating improving growth rates. Index futures (and currency forwards and futures, where applicable or appropriate) are occasionally used to equitize cash and manage portfolio risk. Other derivative instruments may be used, as allowed, as part of the investment strategy. Returns are calculated and stated in U.S. dollars. The return may increase or decrease as a result of currency fluctuations. Returns for periods less than one year are not annualized. To receive a complete list of composites and/or a GIPS compliant presentation, contact: 4500 Main Street Kansas City, MO Toll Free: Fax: Henrietta Street, 4th Floor London, WC2E 8LH United Kingdom Fax: Madison Avenue, 9th Floor New York, NY Toll Free: Fax: Suite 3201 Champion Tower 3 Garden Road, Central Hong Kong Fax: Charleston Road Mountain View, CA Toll Free: Fax: Rosecrans Avenue Suite 4345 El Segundo, CA Toll Free: Fax: American Century Proprietary Holdings, Inc. All rights reserved. GE-FLY