Baron Emerging Markets Fund (BEXIX)

Portfolio Management

MichaelKass
Michael Kass

Fund Manager since 2010

View All Commentary by Michael

Fund Description

Baron Emerging Markets Fund invests primarily in growth companies in developing countries.

   

Portfolio Commentary

Institutional Performance

Review and Outlook (for quarter ended 6/30/2015)

The Review and Outlook for period ending June 30, 2015 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 6/30/2015)
  • Shares of Kingdee International Software Group Co. Ltd. rose during Q2 on reports of an investment by leading e-commerce operator JD.com. Kingdee is a software vendor to small and medium-sized businesses in China. Kingdee is undergoing a strategic transformation from a direct to an indirect sales approach, which we think will allow it to sell software more profitably and earn higher returns on capital over the long run.

  • Shares of Dish TV India Ltd. appreciated in Q2, driven by strong financial performance during the period. The company is India’s largest satellite TV operator with approximately 12.9 million subscribers. We retain conviction based on the long-term growth opportunity in pay TV services in semi-urban/rural India. Dish is also a beneficiary of the government-mandated digitization of cable systems.

  • Eclat Textile Co., Ltd. is a Taiwanese garment manufacturer. The two biggest trends in apparel today are market share gains of fast fashion and functional fabrics. Its leadership as an original design manufacturer for sportswear brands such as Lululemon led to Eclat’s strong Q2 performance. Since a sizable portion of its revenue is earned in U.S. dollars, Eclat also benefited from the strength in the dollar. It is also a potential beneficiary of the Trans Pacific Partnership agreement, which would lower tariffs on goods from its Vietnamese factories.

Detractors (for quarter ended 6/30/2015)
  • As India’s leading media conglomerate, Sun TV Network Ltd. is a beneficiary of the ongoing digitization of cable systems as mandated by the Indian government. Concerns over a potential cancelation of Sun’s broadcasting license pressured shares in Q2. Sun TV plans to dispute any adverse ruling, which could take several years to resolve. In the interim, Sun will be allowed to conduct its regular business activities. We retain conviction due to the expected multifold increase in subscription revenue/earnings post-digitization.

  • Samsung Electronics Co., Ltd. is a leading consumer electronics manufacturer and a key player within the semiconductor and display industries. The company preannounced positive Q1 results in early April, but the stock performed poorly throughout Q2 given investor concern over uncertain demand for its newest handset model, the Galaxy S6, against the backdrop of a slowing smartphone market. We continue to hold Samsung based on its tremendous scale, vertical integration, and superior free cash flow generation.

  • Bank Rakyat Indonesia (Persero) Tbk PT, a leading traditional bank with a strategic position in microfinance and small and medium-sized enterprise lending, declined during Q2 as a slowing macro environment resulted in weaker loan growth and higher delinquencies. Regulatory uncertainty related to a subsidy scheme for micro loans also added to concern over future results. We remain comfortable with Rakyat’s long-term growth potential and solid strategic position.

Quarterly Attribution Analysis (for quarter ended 6/30/2015)

The Quarterly Attribution Analysis for period ending June 30, 2015 is not yet available

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The prospective performance of the companies discussed herein is based on our internal analysis and reflect our opinions only. We cannot promise future returns and our opinions are a reflection of our best judgement at the time of publication. Our views are not intended as recommendations or investment advice to any person and are subject to change at any time based on market and other conditions and Baron has no obligation to update them. Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.

Source: FactSet PA.