September brought another month of negative returns for global equities, as uncertainty about the strength of the Chinese economy, the timing of a shift in US Federal Reserve Bank’s (“Fed”) monetary policy, and concerns of a US government shutdown weighed on global shares. Every equity market in the MSCI World Index (“Index”) delivered negative returns this month. South Korea, which is not part of the Index, was the only market in our investable universe that delivered positive returns. Rounding out the best performing markets, Finland, Hong Kong, New Zealand, and the United States posted the least negative returns, while Israel, Spain, Japan, Germany, and Ireland were the weakest performing countries in the Index. The best performing sectors in the Index were consumer staples, utilities, information technology, consumer discretionary, and industrials. The worst performing sectors were materials, energy, telecommunication services, health care, and financials.
The Fund underperformed the Index this month due primarily to stock selection. Fund holdings in the automobiles & components, consumer durables & apparel, capital goods, banks, and transportation industry groups detracted the most from relative performance. Fund holdings in the pharmaceuticals & biotechnology, materials, telecommunication services, utilities, and health care equipment & services industry groups helped to offset some of the relative underperformance. The largest individual detractor from performance was automobile manufacturer, Volkswagen AG (Germany). Revelations that the company deliberately installed a defeat device to circumvent US Environmental Protection Agency (EPA) emissions testing reduced its market capitalization by approximately 40% as investors sold shares on the news. Additional top detractors included apparel designer & manufacturer, PVH Corp. (PVH, Financial) (United States), oil & gas exploration company, CNOOC Ltd. (CEO, Financial) (Hong Kong), telecommunication services provider, KDDI Corp. (TSE:9433, Financial) (Japan), and construction materials manufacturer, USG Corp. (USG, Financial) (United States). The top individual contributor to return was wireless communications operator, SK Telecom Co., Ltd. (South Korea). Additional top contributors included power utility, PPL Corp. (United States), design-to-distribution business process services technology company, SYNNEX Corp. (United States), automaker, Hyundai Motor Co., Ltd. (South Korea), and airline operator, Delta Air Lines, Inc. (United States).
The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the Fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Diversification does not protect against market loss.
