MSCI Emerging Markets Benchmark

Transcription

1 Cumulative Excess Return % Return % Emerging Markets Quarterly Review Composite Performance Periods Ending June 30, At A Glance Inception: November 1, 1997 : MSCI Emerging Markets AUM: $3.74 billion Qtr 2 1 Year 3 Year 5 Year 10 Year Emerging Markets Gross of Fees Emerging Markets Net 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 Hotel Shilla Co Ltd 0.36 My EG Services Bhd CNOOC Ltd 0.31 Ambev SA Huazhu Group Ltd 0.29 Petrobras Distribuidora SA China Resources Beer Holdings Co Ltd 0.27 Localiza Rent a Car SA Shenzhou International Group Holdings Ltd 0.27 Sberbank Of Russia PJSC Attribution Analysis One Year Ending June 30, 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 Weighted Average Market Capitalization $54.7 B $53.0 B Median Market Capitalization $4.3 B $1.9 B Price To Earnings Ratio, Historical 1 Year 17.2x 13.1x Price To Earnings Ratio, Forecasted 1 Year 14.2x 11.8x EPS Growth, Historical 1 Year 37.3% 31.1% EPS Growth, Forecasted 1 Year 25.5% 17.8% Number of Holdings Number of Countries Turnover, Trailing 1 Year 39% N/A % Cash 2.5% 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 5.94 Alibaba Group Holding Ltd China Internet Software & Services 4.36 South Technology Hardware Storage & Samsung Electronics Co Ltd 3.92 Korea Peripherals Taiwan Semiconductor Manufacturing Semiconductors & Semiconductor Taiwan 3.32 Co Ltd Equipment CNOOC Ltd China Oil, Gas & Consumable Fuels 2.33 Naspers Ltd Industrial & Commercial Bank of China Ltd South Africa Media 2.26 China Banks 2.23 HDFC Bank Ltd India Banks 1.81 China Resources Beer Holdings Co Ltd China Beverages 1.75 Bharat Financial Inclusion Ltd India Consumer Finance 1.72 Total 29.64% Top 10 Overweights Holding Weight Weight Overweight HDFC Bank Ltd CNOOC Ltd Bharat Financial Inclusion Ltd China Resources Beer Holdings Co Ltd Magazine Luiza SA Hotel Shilla Co Ltd NMC Health PLC Shenzhou International Group Holdings Ltd Anhui Conch Cement Co Ltd Globalwafers Co Ltd 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. Sector Consumer Discretionary Consumer Staples Industrials Health Care Information Technology Real Estate Utilities Financials Materials Telecommunication Services Energy % Quarterly Sector Performance Contribution to Return vs. Sector Contribution to Return Contribution to Return Energy Materials Telecommunication Services Utilities Consumer Discretionary Diversified Health Care Real Estate Financials Consumer Staples Industrials Information Technology 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 Country China Brazil United Kingdom Thailand Hungary Czech Republic Peru Egypt Indonesia Russia Greece Colombia United Arab Emirates Taiwan South Korea Mexico Qatar Poland Malaysia South Africa % Quarterly Top Relative Contributors and Detractors by Country Contributor China 0.74 South Korea 0.54 South Africa 0.12 Turkey 0.10 United Kingdom 0.09 Detractor India Malaysia Brazil Thailand Russia

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 American Century Investments 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 224. Available Vehicles Separate Account Collective Investment Trust SICAV Emerging Markets Fund I Share Class - AMKIX R5 Share Class - AEGMX R6 Share Class - AEDMX Investor Share Class - TWMIX Available in U.S. and certain non-u.s. countries Available only in certain non-u.s. countries. 6

7 Quarterly Commentary Review Trade, macroeconomic factors weighed on emerging markets. Uncertainty surrounding U.S.-imposed tariffs and retaliatory moves by China heightened emerging markets volatility during the quarter. This was exacerbated by macro conditions, including a stronger U.S. dollar and higher U.S. rates. Synchronized global expansion is over. We returned to an environment of divergence in global growth rates, which created a sensitivity to economic and political headlines. This resulted in a conflict between solid fundamentals (solid earnings growth and attractive relative value) and near-term risks (dollar strength and potential trade wars). Political issues pressured information technology name. Uncertainties around the election of a new Malaysian prime minister weighed on My EG Services. Investors bid shares of the provider of electronic government services lower on assumptions that changes would make it difficult to secure new projects. We sold our position. Macroeconomic conditions weighed on Brazil-based rental car firm. Localiza Rent a Car reported mixed quarterly results, though mostly in line with consensus. However, concerns about the economic environment in Brazil, including slowing consumption and the weaker used car market, pressured the stock. Hotel operator drove consumer discretionary gains. Huazhu Group (formerly China Lodging Group) rose on better revenue and growth expectations and stronger revenue per available room trends. Improving consumer activity creating opportunities. Burgeoning emerging markets consumer activity supports our consumer discretionary overweight, where investments include retail, education, and textile names. Production growth aids China-listed mining company. We initiated a new position in China-listed MMG, a mining company benefiting from capacity additions and strong production growth at its copper and zinc mines. Key Contributors Hotel Shilla. Better-than-expected first-quarter earnings growth supported stock gains for Hotel Shilla. The South Korea-based operator of luxury hotels and duty-free shops benefited from strong duty-free sales and monetization of its non-duty-free sales business. A resurgence of Chinese tourists in Korea also contributed to stock gains. CNOOC. Rising oil prices benefited oil producer CNOOC. Oil price increases were supported by a decline in output in Venezuela and concerns about U.S. sanctions against Iran. CNOOC raised earnings projections to reflect higher oil price assumptions. Gas production further supported stock gains as demand for gas in China is growing. Huazhu Group. The stock of midpriced, multibrand hotel operator Huazhu Group, formerly known as China Lodging Group, rallied after exceeding expectations for revenue and earnings growth. The company also reported that revenue per available room was steady against a tougher comparison and two-year trends are accelerating. Key Detractors My EG Services. Uncertainties surrounding the election of a new prime minister in Malaysia pressured the stock. The Malaysia-based firm is a provider of electronic government services. Investors bid shares lower on assumptions that government changes would make it difficult for My EG to secure new projects. We sold our position. Ambev. A challenging macroeconomic environment pressured the stock of this Brazil-based brewing company. Headwinds included political uncertainty, currency depreciation, high unemployment, weak consumer confidence, and higher raw material costs, all of which have made it difficult for Ambev to improve volume growth. Petrobras Distribuidora. The stock of this Brazil-based distributor and marketer of petroleum derivatives and biofuels declined on profitability as Petrobras redefines its fuel pricing. We continue to see strong upside based on our belief that fuel consumption will expand. Notable Trades Cosmax. We initiated an investment in this South Korea-based cosmetics manufacturer upon seeing an acceleration in sales as Chinese tourists return to South Korea. We believe business is sustainable given the long-term trend of cosmetics brands seeking to outsource products. Taiwan Cement. largest cement producer, based on our belief that it has the capacity to expand in China, where growth and cement prices are strong. Management recently reported much stronger-than-expected net profits and maintains a positive outlook for second quarter. China Vanke. We eliminated our position in this real estate development firm after seeing a deceleration in sales attributed to -quarter investment income fell sharply due to provisioning for asset impairment losses at certain projects, while financial expenses surged. AAC Technologies. We sold our shares of this manufacturer of miniaturized acoustic components after it reported disappointing first-quarter net profits and lowered expectations for earnings per share growth on lower haptics components growth due to rising competition and ongoing margin pressure in its non-acoustics segment. 7

8 Positioning for the Future Our process continues to be based on fundamental analysis and bottom-up security selection, but certain broad themes have emerged. Improving consumer activity drives discretionary overweight. We continue to find examples of companies benefiting from strengthening emerging markets consumer demand for luxury, education, and higher standard of living purchases. This is supporting our overweight in consumer discretionary stocks. Stronger demand in South Korea aiding consumer staples names. We increased exposure to the consumer staples sector, beginning positions in cosmetics firm Cosmax and confectionery maker Orion in South Korea. Cosmax is benefiting from increasing demand from tourists, while Orion is seeing increased revenue from stronger domestic demand. Weakened earnings outlook hurts financial services name. We eliminated a position in Thailand-based Srisawad and we reduced our earnings outlook for the firm. The company is restructuring its business and has also seen an increase in its nonperforming loan ratio as a result of defaults by two clients. Lack of opportunities in energy lead to underweight. We remain underweight the energy sector, where we continue to have difficulty finding names that fit our investment process. Our holdings in the sector represent companies that have earnings catalysts outside commodity prices. Reduced exposure to Brazil. We reduced our position in Brazilbased distributor and marketer of petroleum derivatives and biofuels Petrobras Distribuidora. While the firm is being pressured by concerns of government interference in fuel pricing, we expect continued upside based on our expectations of expanded fuel consumption. 8

9 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 American Century Investments 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. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. For purposes of compliance with the Global Investment Performance Standards (GIPS tment 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: American Century Investments 4500 Main Street Kansas City, MO Henrietta Street, 4th Floor London, WC2E 8LH United Kingdom Madison Avenue, 9th Floor New York, NY Suite 3201 Champion Tower 3 Garden Road, Central Hong Kong Charleston Road Mountain View, CA Macquarie Street Suite 1324 Sydney, NSW 2000, Australia Rosecrans Avenue Suite 4345 El Segundo, CA American Century Proprietary Holdings, Inc. All rights reserved. IM-FLY