Realindex Emerging Markets-Class A (FSF1101AU) Report & Performance

What is the Realindex Emerging Markets-Class A fund?

Realindex Emerging Markets Fund aims to provide capital and income growth by investing in global shares predominantly in emerging markets and outperforming the MSCI Emerging Markets Index over rolling five-year periods before fees and taxes.

  • Realindex forms a universe of emerging market companies based on accounting measures, which gives the portfolio a value tilt. Factors such as quality, near-term value and momentum are applied to form a final portfolio of companies.
  • The resulting portfolio has a value tilt relative to the benchmark and provides the benefits of being lower in cost, lower turnover and highly diversified compared to traditional active investment strategies.
  • By weighting the portfolio based on accounting measures and factors such as quality, value and momentum, Realindex aims to generate higher returns versus the benchmark over the long term.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Realindex Emerging Markets-Class A

Realindex Emerging Markets-Class A Fund Commentary August 31, 2023

Realindex Emerging Markets Value returned -2.75% (net of fees) during August, versus the MSCI Emerging Markets Net Index which returned -2.36% (in AUD).

Emerging Markets performed poorly with the MSCI EM index posting -2.36% (AUD terms). This mainly stemmed from the downtown in economic indicators in China and its debt levels, which are creating challenges within the Property Sector. Poor performance was also seen in Asian markets with the Hong Kong’s Hang Seng and China’s CSI 300 falling by 8.5% and 6.2%, respectively. Overall within the MSCI EM Index, 10 out of 11 sectors were negative with the worst performers being Consumer Discretionary (-4.2%), Communication Services (-4.2%), and Utilities (-3.7%).

Within this environment, Value stocks in Emerging Markets outperformed Growth stocks by 0.5% over the month (MSCI Emerging Markets Value -2.1% vs. Growth -2.6%, in AUD). Over the past year Value has outperformed Growth by 8.0% (AUD), while on a five year basis Value has underperformed Growth by 0.05% p.a. (AUD).

Despite this, fund performance was lower than the benchmark over the month, mainly due to stock selection within Sectors and poor positioning across countries. From a sector perspective, positive stock selection in Energy names were more than offset by stock selection in Financials, Materials and Information Technology, which were the main detractors to performance. From a sector positioning perspective, the overweight to Financials aided the fund, while the underweight to Information Technology was a detractor. On a country basis, allocation effects hindered performance especially the underweight to India. The overweight to Korea was the largest contributor to performance stemming mainly from strong stock selection, while the overweight to China was the largest detractor as a result of stock selection, particularly from Chinese Communication Services and Real Estate names. The largest stock level contributor was the overweight to REC Limited and the largest stock level detractor was the overweight to Ping An Insurance (Group) Company of China, Ltd.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of August 2023 the portfolio reflected a 78.6% dividend yield premium to the MSCI EM index, whilst trading at a 33.8% price to book discount, a 49.5% price to cashflow discount and 50.3% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Note: Returns in parenthesis show the total return for the month ending 31 August 2023. All returns are given in local currency terms unless otherwise stated.

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Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Structure
?
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
FUM
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Spread
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
Realindex Emerging Markets-Class AFSF1101AUManaged FundsForeign EquityEmerging MarketsForeign Equity - Emerging Markets IndexWorld Emerging Markets Index171.57 M0.47%0.00%0.2%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Realindex Emerging Markets-Class A5.71%3.62%17.69%5.55%5.39%9.66%12.24%12.2%-3.72%-18.95%-26.33%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Realindex Emerging Markets-Class AForeign Equity - Emerging Markets Index1.84%0.04%NA%NA%NA%1.144.2%4.93%0.920.92

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Realindex Emerging Markets-Class AYesTower 1, Ground Floor, 201 Sussex St,Sydney, NSW, 2000+61 2 93782000https://www.cfs.com.au/-

Product Due Diligence

What is Realindex Emerging Markets-Class A

Realindex Emerging Markets-Class A is an Managed Funds investment product that is benchmarked against World Emerging Markets Index and sits inside the Foreign Equity - Emerging Markets Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Realindex Emerging Markets-Class A has Assets Under Management of 171.57 M with a management fee of 0.47%, a performance fee of 0.00% and a buy/sell spread fee of 0.2%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Realindex Emerging Markets-Class A has returned 5.71% in the last month. The previous three years have returned 5.55% annualised and 12.2% each year since inception, which is when the Realindex Emerging Markets-Class A first started.

How is risk measured in this investment product?

There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Realindex Emerging Markets-Class A first started, the Sharpe ratio is NA with an annualised volatility of 12.2%. The maximum drawdown of the investment product in the last 12 months is -3.72% and -26.33% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.

What is the relative performance of the investment product?

Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Realindex Emerging Markets-Class A has a 12-month excess return when compared to the Foreign Equity - Emerging Markets Index of 1.84% and 0.04% since inception.

Does the investment product produce Alpha over its Peers?

Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Realindex Emerging Markets-Class A has produced Alpha over the Foreign Equity - Emerging Markets Index of NA% in the last 12 months and NA% since inception.

What are similar investment products?

For a full list of investment products in the Foreign Equity - Emerging Markets Index category, you can click here for the Peer Investment Report.

What level of diversification will Realindex Emerging Markets-Class A provide?

Realindex Emerging Markets-Class A has a correlation coefficient of 0.92 and a beta of 1.14 when compared to the Foreign Equity - Emerging Markets Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.

How do I compare the investment product with its peers?

For a full quantitative report on Realindex Emerging Markets-Class A and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Realindex Emerging Markets-Class A with the World Emerging Markets Index?

For a full quantitative report on Realindex Emerging Markets-Class A compared to the World Emerging Markets Index, you can click here.

Can I sort and compare the Realindex Emerging Markets-Class A to do my own analysis?

To sort and compare the Realindex Emerging Markets-Class A financial metrics, please refer to the table above.

Has the Realindex Emerging Markets-Class A been independently verified by SMSF Mate?

This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.

How can I invest in Realindex Emerging Markets-Class A?

If you or your self managed super fund would like to invest in the Realindex Emerging Markets-Class A please contact Tower 1, Ground Floor, 201 Sussex St,Sydney, NSW, 2000 via phone +61 2 93782000 or via email -.

How do I get in contact with the Realindex Emerging Markets-Class A?

If you would like to get in contact with the Realindex Emerging Markets-Class A manager, please call +61 2 93782000.

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Realindex Emerging Markets-Class A. All data and commentary for this fund is provided free of charge for our readers general information.

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Historical Performance Commentary

Performance Commentary - July 31, 2023

Realindex Emerging Markets Value returned +5.58% (net of fees) during July, outperforming the MSCI Emerging Markets Net Index which returned +4.93% (in AUD).

Global stocks performed well in July, with most regional markets posting positive gains. Abating inflation in the US and abroad, and increasing evidence pointing to a soft landing has helped support global equities. US headline inflation fell more than expected to 3% year on year. In response, the S&P 500 index rose 3.2% in USD terms in July, taking year to date returns to over 20%. This was despite the US Federal Reserve raising rates by 25 basis points in line with market expectations. In China, despite a slowing in GDP growth for the second quarter, the MSCI China Index posted a solid 9.1% in local currency and pushed Asian equities higher in July – largely a response to policy easing and hopes for further stimulus within the Chinese economy. Within Emerging Markets, performance was strong with China leading major markets. Consumer Discretionary (+12.5%), Materials (+7.7%) and Real Estate (+6.4%) sectors led MSCI Emerging Markets in July, while Information Technology names lagged (-0.35%).

Within this environment, Value stocks outperformed Growth stocks by 0.6% over the month (MSCI Emerging Markets Value +5.2% vs. Growth +4.7%, in AUD). Over the past year, Value has outperformed Growth by 7.1% (AUD), while on a five year basis, Value has outperformed Growth by 0.1% p.a. (AUD).

From a sector perspective, the fund strongly benefited from stock selection within Information Technology and its underweight to the sector, largely the result of its underweight to Semiconductors. Stock selection within Materials was also a positive contributor to performance. On the other hand, the fund was negatively impacted by its underweight to the Consumer Discretionary sector as well as poor stock selection within that sector. Regionally, the fund benefited from underweights to Taiwan and India, while stock selection in China was a major detractor, largely stemming from its underweights to Chinese Consumer Discretionary names. The largest stock level contributor was the overweight to Wistron Corporation and the largest stock level detractor was the underweight to Alibaba Group Holding Limited.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of July 2023 the portfolio reflected a 80.0% dividend yield premium to the MSCI EM index, whilst trading at a 29.3% price to book discount, a 50.6% price to cashflow discount and 49.9% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Performance Commentary - May 31, 2023

Realindex Emerging Markets Value returned -0.46% (net of fees) during May, versus the MSCI Emerging Markets Net Index which returned +0.40% (in AUD). Emerging Markets were down in May, with Chinese equities underperforming (MSCI China -6.5%) following weaker than expected economic data.

Expectations of China’s growth recovery receded as various economic data points missed expectations and further policy measures to steady growth remained absent. The official manufacturing PMI fell to a below-forecast 48.8 in May, marking the second consecutive contraction for the year. Korean (MSCI Korea + 7.0%) and Taiwanese (MSCI Taiwan +9.6%) stocks outperformed, largely driven by the Information Technology sector amid growing expectations of the future potential of AI. Latin America was positive but muted for May (MSCI Latin America: +1.3%).

Within this environment, the strategy underperformed given the relative strength of growth based names during the month; Value stocks underperformed Growth stocks by 0.4% over the month (MSCI Emerging Markets Value +0.2% vs. Growth +0.6%, in AUD). Over the past year, Value has outperformed Growth by 4.8% (AUD), while on a five-year basis Value has outperformed Growth by 0.2% p.a. (AUD).

From a sector perspective, while favourable under-weight positioning in Consumer Discretionary names boosted performance, the fund’s overweight positioning to Financials and, in particular, Insurers was the main detractor to performance. The underweight to Information Technology names, in particular within Semiconductor manufacturers who benefited from renewed investor interest in AI related stocks, was another key detractor. On a country basis, the largest detractor was the underweight to India and Taiwan, while the largest contributor was the overweight to China, though much of this was due to the funds underweight to Chinese Consumer Discretionary names. The largest stock level detractor was the underweight to Taiwan Semiconductor Manufacturing Company Limited and the largest stock level contributor was the overweight to Wistron Corporation.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of May 2023 the portfolio reflected a 75.9% dividend yield premium to the MSCI EM index, whilst trading at a 33.3% price to book discount, a 52.2% price to cashflow discount and 50.9% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Performance Commentary - April 30, 2023

Realindex Emerging Markets Value returned +2.61% (net of fees) during April, outperforming the MSCI Emerging Markets Net Index which returned +0.20% (in AUD).

Global equity markets were mixed amidst persistent inflation which continued to pose a challenge to central banks. US stocks made limited gains in April led by large caps, as investor optimism resulting from the Fed’s anticipated moderation of monetary policy was tempered by concerns over economic growth.

Uncertainty in the banking sector also continued with the collapse of First Republic bank. China reaffirmed its supportive policy stance for the economy amidst growing exports and consumer demand. Despite this, China’s equity market continued to underperform in April, leading emerging markets lower as concerns over its political stance on Taiwan, relationship with Russia and ongoing regulations with the private sector still weigh on investors.

Overall, Emerging equity markets were very weak in April, lagging developed markets with the MSCI EM Index posting +0.2% in AUD terms. Value oriented sectors Energy (+7.6%) and Financials (+5.6%) strongly outperformed growth oriented Consumer Discretionary and Communication Services sectors with each posting -5.7% and -4.3% respectively.

In this environment, the portfolio benefitted from its exposure to Value stocks which outperformed Growth stocks by 3.0% over the month (MSCI Emerging Markets Value +1.8% vs. Growth -1.3%, in AUD). Over the past year Value has outperformed Growth by 5.9% (AUD), while on a five year basis Value has outperformed Growth by 0.3% p.a. (AUD).

The portfolio strongly benefitted from its overweight positioning in China; in particular its large overweight to China Financials and underweight to China Consumer Discretionary names were the biggest drivers of the portfolio from a country perspective. The portfolio’s underweight to India and Saudi Arabia were amongst the largest detractors to performance from a country perspective. From a sector perspective, favourable positioning in Financials which the portfolio is significantly overweight helped drive performance, along with the portfolio’s underweight to IT names. The largest detractor from a sector perspective was the overweight to Materials, largely the result of stock selection. The largest stock level contributor was the underweight to Tencent Holdings Ltd. and the largest stock level detractor was the underweight to Reliance Industries Limited.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of April 2023 the portfolio reflected a 75.7% dividend yield premium to the MSCI EM index, whilst trading at a 33.3% price to book discount, a 53.5% price to cashflow discount and 51.5% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Note: Returns in parenthesis show the total return for the month ending 30 April 2023. All returns are given in local currency terms unless otherwise stated.

Performance Commentary - February 28, 2023

Realindex Emerging Markets Value returned -1.49% (net of fees) during February, outperforming the MSCI Emerging Markets Net Index which returned – 2.28% (in AUD).

Emerging markets were mixed in February, with China (-6.4%) and Brazil (-5.1%) trading lower and Turkiye (+10.5%) and Eastern Europe trading higher. A warmer European winter along with their ability to diversify energy imports have meant a fully-fledged energy crisis has not materialized. This, along with China’s reopening, has brought a degree of softening or cautious optimism in the global economy. Beijing has begun to support housing demand and restore consumer sentiment, after limiting leverage last year in the wake of the liquidity crisis. Turkiye’s central bank has lowered rates to support the economy in the aftermath of the earthquake. In the MSCI Emerging Markets Index, majority of sectors fell for the month with Consumer Discretionary (-8.6%) and Utilities (- 7.2%) struggling the most, while Consumer Staples (+0.7%) and Information Technology (+0.7%) posted the only positive returns.

Within this environment, Value stocks outperformed Growth stocks by 2.2% over the month (MSCI Emerging Markets Value -1.1% vs. Growth -3.4%, in AUD). Over the past year Value has outperformed Growth by 5.7% (AUD), while on a five year basis Growth has outperformed Value by 0.2% p.a. (AUD).

The fund outperformed the benchmark due to strong stock selection within China (+137bps) while the largest detractor was the overweight to Hong Kong. The biggest wins for the fund were the underweights to Chinese Consumer Discretionary and Information Technology names such as Meituan (+22bps) and Alibaba (+18bps). Overall, the largest detractors were stock selection in Financials such as the overweight to Ping An Insurance (Group) Company of China, Ltd.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of February 2023 the portfolio reflected a 81.0% dividend yield premium to the MSCI EM index, whilst trading at a 36.1% price to book discount, a 50.3% price to cashflow discount and 52.5% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Note: Returns in parenthesis show the total return for the month ending 28 February 2023. All returns are given in local currency terms unless otherwise stated.

Performance Commentary - January 31, 2023

Realindex Emerging Markets Value returned +4.00% (net of fees) during January, outperforming the MSCI Emerging Markets Net Index which returned +3.84% (in AUD).

Global markets were off to a solid start in January as falling inflation, relatively robust economic data, and China’s COVID policy change drove investor hopes of a “soft landing” for the global economy. Equities, bonds and alternatives generally rose on the back of this renewed optimism while bond yields declined and equity market volatility fell to its lowest level in almost a year. In Emerging Markets, the positive gains observed were in part driven by China; improved economic momentum and confidence was reflected by the outperformance of the Chinese market, both onshore (CSI 300 Index +7.3%) and offshore (Hang Seng Index +10.4%). Growth oriented sectors outperformed with Information Technology (+9.4%) as well as Communication Services and Discretionary sectors leading the way. Utilities (-6.7%) and Energy (-1.5%) were the main underperforming sectors.

Within this risk on market environment, Value stocks underperformed Growth stocks by 1.3% over the month (MSCI Emerging Markets Value +3.2% vs. Growth +4.5%, in AUD). Over the past year Value has outperformed Growth by 5.8% (AUD), while on a five year basis Value has underperformed Growth by 0.7% p.a. (AUD).

Despite Growth’s strength during the month, the fund managed to outperform owing to good positioning to India, which the fund was underweight; in particular within Indian Financials. Poor stock selection in Chinese names which the fund was overweight was the main detractor in performance from a country perspective, though this was not enough to offset the overall gains observed from the fund’s other country positions. From a sector allocation perspective, whilst the overweight to Financials was a detractor, stock selection within Financials and predominantly banks more than offset those poor allocation effects. This made Financials the most significant contributor to performance from a sector perspective. The underweight to Information Technology names also detracted performance, however stock selection was the most significant detractor from a sector perspective. The largest stock level contributor was the overweight to Ping An Insurance (Group) Company of China, Ltd. and the largest stock level detractor was the underweight to Taiwan Semiconductor Manufacturing Co., Ltd.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of January 2023 the portfolio reflected a 80.8% dividend yield premium to the MSCI EM index, whilst trading at a 40.1% price to book discount, a 52.3% price to cashflow discount and 55.2% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Performance Commentary - December 31, 2022

Realindex Emerging Markets Value returned +7.30% (net of fees) during the December quarter, outperforming the MSCI Emerging Markets Net Index which returned +4.01% (in AUD).

Emerging markets faced several challenges in 2022, including Russia’s invasion of Ukraine, tighter financial conditions to address higher inflation, a stronger US dollar, and China’s economic decline due to its zero-COVID policy and problems in the property sector. Despite a nearly 15% decline in the MSCI EM Index over the year, the asset class showed signs of recovery in Q4, due to China’s focus on reopening and support for the property sector, as well as signs that inflation may have peaked across several emerging economies. In Q4, many emerging markets delivered positive returns, with Asian and EMEA markets leading the way while LATAM performance was flat; a result of uncertainty in Brazil in the lead up to its presidential elections.

In terms of sectors, positive performance in MSCI Emerging Markets was driven by Communication Services (+7.9%) followed by Health Care (+7.3%), while Energy (-1.2%) and Utilities (-0.9%) lagged behind the index. With this backdrop, the fund benefitted from Value stocks generally outperforming Growth stocks by 0.1% over the quarter (MSCI Emerging Markets Value +4.1% vs. Growth +4.0%, in AUD). Over the past year, Value has outperformed Growth by 8.7% (AUD), while on a five year basis Value has outperformed Growth by 0.3% p.a. (AUD) which has provided further tailwinds for the fund.

From a country perspective, the fund strongly benefitted from its underweight to India, with both allocation and stock selection delivering performance. The overweight to Turkey and Korean Financials also significantly added to performance. The fund’s overweight to South Africa and Brazil were small detractors.

From a sector perspective, stock selection within Financials, the fund’s largest sector overweight, was the most significant contributor to performance. Whilst the underweight to Communication Services was the largest sector detractor, however small in comparison. The largest stock level contributor was the overweight to Ping An Insurance (Group) Company of China, Ltd. and the largest stock level detractor was the underweight to Tencent Holdings Ltd.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of December 2022 the portfolio reflected a 80.5% dividend yield premium to the MSCI EM index, whilst trading at a 39.7% price to book discount, a 53.1% price to cashflow discount and 56.7% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Performance Commentary - November 30, 2022

Realindex Emerging Markets Value returned +10.47% (net of fees) during November, outperforming the MSCI Emerging Markets Net Index which returned +9.64% (in AUD).

With signs that global inflation may be easing in November, global equity markets were boosted by speculation that interest rates in key regions may not need to be raised significantly. The MSCI World Index rose 5.7%, although the gain was lower in AUD terms due to the strength of the Australian dollar. In the United States and Europe, major indices such as the S&P 500 (+5.4%), NASDAQ (+4.4%) and Euro Stoxx 50 (+9.6%) registered solid gains. However, Asian markets took the lead with strong returns from the CSI 300 (+9.8%) and Hang Seng (+26.6%) due to optimism around potential relaxation of China’s COVID restrictions. Latin America underperformed for the month (MSCI Latin America: -4.1%). off the back of weakening oil prices. The strength in Emerging Markets was most seen in Real Estate (+29.6%) and Consumer Discretionary (+20.1%) while the weakest sector was Utilities (+2.3%); overall, growth sectors such as Technology (+12.8%) in Emerging Markets outperformed.

As a result, Value stocks underperformed Growth stocks by 2.6% over the month (MSCI Emerging Markets Value +8.3% vs. Growth +10.9%, in AUD) which in turn impacted the fund’s performance. Over the past year Value has outperformed Growth by 11.8% (AUD), while on a five year basis Value and Growth have been on par.

On a country basis, the fund benefitted from the underweight to Saudi Arabia and the largest detractor was the underweight to Taiwan. From a sector perspective, the largest contributor was the overweight to Financials largely due to stock selection rather than sector positioning and the largest detractor was the underweight to Communication Services, which again was due to stock selection effects. The largest stock level contributor was the overweight to Ping An Insurance (Group) Company of China, Ltd. and the largest stock level detractor was the underweight to Tencent Holdings Ltd.

Driven by the methodology of rebalancing further into cheap value companies, the portfolio continues to sit on deep valuation discounts. At the end of November 2022 the portfolio reflected a 79.8% dividend yield premium to the MSCI EM index, whilst trading at a 37.3% price to book discount, a 51.7% price to cashflow discount and 56.3% price to sales discount, indicating that the portfolio remains well positioned for mean reversion in Value.

Kind words from Aussies managing
their own self funded futures

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    Tim B, Business Owner, SMSF Trustee