The Oakmark Global Select Fund had a strong quarter in terms of both absolute and relative performance, returning 24.4% for the period ending December 31. The benchmark, MSCI World Index, returned 14.0% for the same quarter. Since its inception in October 2006, the Fund has returned an average of 8.2% per year, outperforming the MSCI World Index's annualized gain of 7.0% over the same period. For the 2020 calendar year, the Fund returned 13.0%, compared to the MSCI World Index, which returned 15.9%.
U.K.-based retail bank Lloyds Banking Group (LSE:LLOY, Financial) was a large contributor for the fourth quarter, which marked a sharp reversal of the stock price decline realized in the third quarter. Positive Brexit deal developments helped boost the share prices of European-based companies, including Lloyds, in the fourth quarter and culminated in a late-period trade agreement between the U.K. and European Union that formalized a new economic and security partnership. Lloyds also released third-quarter earnings that we found to be reasonable considering present macroeconomic conditions. For the full fiscal nine-month period, total revenue fell 17% and underlying operating profit declined 85% from a year earlier. Results were significantly impacted by impairment charges that rose dramatically (+334%) for the full period. However, the vast majority of the impairment charge increase occurred in the first two quarters and eased in the third quarter, which helped drive strong sequential growth of underlying operating profit, totaling GBP 1.2 billion. Other important metrics showed evidence of improvement as well, including retail deposits that rose 7%, which resulted in a loan to deposit ratio of 98%, reflecting a healthy liquidity position. Importantly, Lloyds' balance sheet remains strong as its Tier-1 ratio reached 15.2% in the third quarter (up from 14.6% in the second quarter), which exceeded both management's target of 12.5% and regulatory requirements of roughly 11%. Management cited additional encouraging signs of a business recovery, including increased mortgage activity, which we think positions the company advantageously as the general economy normalizes. As we have expressed previously, we contend that Lloyds possesses a wide range of strengths to draw upon to reinforce its business during current near-term challenges. Even including its strong fourth-quarter stock price performance, we still believe the company's shares are undervalued compared with our estimate of intrinsic value.
Alibaba Group (BABA, Financial), a China-based internet and direct marketing retailer, was a large detractor in the fourth quarter. The company faced regulatory headwinds during the quarter due to China's new anti-monopoly law as well as the suspension of the highly anticipated initial public offering of Ant Group, wherein Alibaba holds an approximately one-third ownership stake. The increased regulations on both Alibaba and Ant are still in the consultation phase and have not yet been finalized. While we find it difficult to accurately quantify these risks, we believe it is likely Alibaba will face greater regulatory scrutiny and slower growth going forward. However, the company remains an important driver of innovation in China and even with its slower growth, we believe its valuation is compelling. In the meantime, we continue to monitor this fluid situation.
During the quarter, we sold our investment in Samsung Electronics (XKRX:005930, Financial) (South Korea) and initiated a position in Novartis (XSWX:NOVN, Financial) (Switzerland), a former Fund holding. Novartis is a global health care company that produces pharmaceuticals for a range of uses, including oncology, ophthalmology, immunology, neuroscience and cardiology. Novartis' portfolio of compounds is one of the most diversified in the industry; its top-selling compound represents only 9% of its pharmaceutical division's sales. We've followed Novartis for many years and believe the company will enjoy robust long-term growth as management continues to shift the business away from the non-pharmaceutical divisions and refocus on what we think they do best: drug development.
We continue to believe the Swiss franc is overvalued versus the U.S. dollar. As a result, we defensively hedged a portion of the Fund's exposure. Approximately 14% of the Swiss franc exposure was hedged at quarter end.
Geographically, we ended the quarter with 49% of the portfolio in the U.S., 46% in the U.K. and Europe, and 5% in Asia.
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The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers' research and investment process, and portfolio characteristics) are for informational purposes only and represent the investments and views of the portfolio managers and Harris Associates L.P. as of the date written and are subject to change and may change based on market and other conditions and without notice. This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete or accurate.
Certain comments herein are based on current expectations and are considered "forward-looking statements". These forward looking statements reflect assumptions and analyses made by the portfolio managers and Harris Associates L.P. based on their experience and perception of historical trends, current conditions, expected future developments, and other factors they believe are relevant. Actual future results are subject to a number of investment and other risks and may prove to be different from expectations. Readers are cautioned not to place undue reliance on the forward-looking statements.
