Review and Outlook
The Review and Outlook for period ending September 30, 2016 is not yet available
Top Contributors/Detractors to Performance
Quarterly Attribution Analysis
When reviewing performance attribution on our portfolio, please be aware that we construct the portfolio from the bottom up, one stock at a time. Each stock is included in the portfolio if it meets our rigorous investment criteria. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to achieve a target sector allocation or to approximate an index. Our exposure to any given sector is purely a result of our stock selection process.
Baron Emerging Markets Fund gained 7.33% in the third quarter, yet trailed the MSCI EM IMI Growth Index by 203 basis points due to a combination of stock selection, relative sector weights, and average cash exposure of 8.8% in an up market.
On a country basis, outperformance of investments in India, Panama, and Korea and lack of exposure to poor performing Malaysian and Turkish equities added the most value. These positive effects were overshadowed by underperformance of investments in South Africa, Taiwan, China, Hong Kong, and Indonesia. Lower exposure to outperforming Chinese equities, which rose 17.4% as a group within the index, and larger exposure to lagging equities in Mexico also hampered relative results.
On a sector level, Industrials investments added the most value, mainly due to the outperformance of Panamanian airline Copa Holdings, S.A. and South African conglomerate Bidvest Group Ltd. Copa was the second largest contributor to absolute results, while shares of Bidvest rose after the company successfully spun off its food services division. In addition, Bidvest continued to grow earnings despite a challenging macro environment in South Africa.
Significantly lower exposure to the top performing Information Technology (IT) sector, which rose nearly 18% in the index, and underperformance of investments in Financials and Materials detracted the most from relative results. Within IT, lower exposure to sizeable positions in the index that were up sharply in the quarter, including Tencent Holdings Ltd., Alibaba Group Holding Ltd., and Samsung Electronics Co., Ltd., weighed the most on relative performance. Weakness in Financials was mostly attributable to the underperformance of diversified banks, led by Grupo Financiero Banorte, S.A.B. de C.V. of Mexico and BDO Unibank, Inc. of the Philippines. Shares of Grupo Financiero Banorte declined after the company reported a slight increase in delinquencies within certain consumer portfolios, suggesting potentially higher credit costs ahead, while BDO’s shares underperformed after the company announced an impending equity rights issuance to fund future growth. Brazilian financial exchange operators BM&FBOVESPA SA and Cetip SA also hampered relative performance after performing well early in the year following their announced merger. Uncertainty around the timing of regulatory approval of the deal and a recently launched antitrust investigation by a competitor weighed on these stocks. Within Materials, larger exposure to poor performing gold stocks through investments in AngloGold Ashanti Limited of South Africa and Zhaojin Mining Industry Company Limited of China detracted the most from relative results.
Back to Top
Invest In Baron Funds Today