Please note that the commentary is for the US dollar retail class of the fund. The feeder fund is 100% invested in the underlying US dollar fund. However, given small valuation, trading and translation differences for the two funds, investors should expect differences in returns in the short term. Over the long term, we aim to achieve the same outcome in US dollar terms for both funds.

The fund declined 2.6% against a flat benchmark, bringing the rolling 12- month performance to -5.6% against the 1.4% returned by the MSCI All Country World Index.

After a rollercoaster quarter, the Index finished flat for the period, masking the small advance by developed equity markets and the decline in emerging markets (EMs). The quarter was marked by a rotation in September, reflecting a negative outlook on the weak global economy and trade. Equities mirrored this reversal, with the momentum factor giving back its prior gains, and value stocks rising. Oil prices briefly rose by nearly 20% on news of an attack on facilities in Saudi Arabia, before subsiding when it became clear that it would not affect the oil supply for long. As was widely expected, the US Federal Reserve cut interest rates by another 25 basis points (bps) and the European Central Bank cut its rates further into negative territory and restarted its bond buying programme. The US-China trade war continues with no deal in sight. Rhetoric coming from President Donald Trump is also making it hard to see how this could be resolved.

Japan was the best-performing region over the quarter, advancing 3.3% (in US dollar terms). The weakest return was from Asia ex-Japan, which declined by 5.1% (in US dollar terms). North America advanced 1.5% and Europe fell 1.8% (in US dollar terms). EMs had a poor quarter, declining 4.3%, lagging developed markets which advanced 0.5% both (in US dollar terms). On a look-through basis, the fund’s exposure to North America is in line with the benchmark, overweight to Europe, underweight Japan and it has a marginal overweight position to EMs.

Among the global sectors, utilities (+5.8%), real estate (+3.6%) and consumer staples (+3.5%) rose the most. The worst-performing sectors were energy (-6.7%), materials (-4.1%) and healthcare (-1.6%).

The fund’s underlying managers mostly underperformed during the quarter, with one manager in particular contributing to the underperformance.

Contrarius Global Equity declined 11%. Contrarius has a large exposure to oil through its investments in oil services and deep-sea drillers. A volatile oil price and debt issues within the drillers mean that these businesses are subject to extreme movements, as reflected in the share price declines in Transocean (-30%), Valaris (-43%) and Diamond Offshore (-37%). Global growth concerns are weighing on the oil price and depressing oil services in the short term. The drillers are very cheap and face their own set of issues, but capacity reduction and the reserve replacement needs mean that they have potential for excellent returns over the medium to long term. Contrarius is often an early investor and strong quarterly returns from previous laggards such as Macy’s (+7.2%), Bed Bath & Beyond (+12%) and Abercrombie & Fitch (+8.2%) shows that patience can be rewarded.

After a long run of index-beating performance, Egerton slightly underperformed over the quarter with negative alpha of 1%. Exposure to energy was a driving factor but performance was also impacted by the decline in steel pipe producer Tenaris’s share price (-19%). Tenaris incurred greater costs than expected and guided to softer sales in the medium term.

Lansdowne continued to struggle with another small underperformance this quarter. Exposure to materials through Rio Tinto (-13%) and Arcelor Mittal (- 21%) contributed to this as the market worried over global growth. There was some good news for them though after the German courts ruled that a rent freeze imposed by the Berlin government was illegal and caused a strong rebound in Vonovia, a residential housing provider, which had previously fallen on news of the rent freeze.

Despite strong returns from communication services exposure, Maverick underperformed by 1% over the period. DXC Technology (-46%) fell after warning of a large decline in sales and the subsequent departure of its CEO. Maverick is very happy with the new CEO and that its investment thesis remains intact.

Coronation Global Emerging Markets marginally underperformed its index but continues to enjoy a very strong period of performance year-to-date. Consumer staples were a strong contributor and after a year of selling off, the tobacco stocks also made a large positive contribution to performance. Coronation Global Equity Select was in line with the benchmark, as a strong contribution from its financial exposure was offset by the performance of its consumer discretionary exposure.

Outlook
The effect of President Trump’s trade wars is beginning to ripple through the global economy and while the relaxing of monetary policy will ease some of the impact, many investors are concerned it may not be enough to offset the full effect. Furthermore, as mentioned previously, it is hard to see a resolution of this any time soon. However, with an election year looming and a slowing economy one shouldn’t be surprised if President Trump acquiesces to something to improve his chances of re-election. If, of course, he isn’t impeached first. Another Brexit date is coming up and with 20 days to go, no one knows exactly what is going to happen on 31 October. The uncertainty is affecting the UK and wider European economy as businesses await the outcome. Resolution of these two issues could be very positive for markets but equally increase the risks to the downside while they remain unresolved. EMs however have sold off recently and with support from monetary easing they look attractive over the medium term.

Please note that the commentary is for the US dollar retail class of the fund. The feeder fund is 100% invested in the underlying US dollar fund. However, given small valuation, trading and translation differences for the two funds, investors should expect differences in returns in the short term. Over the long term, we aim to achieve the same outcome in US dollar terms for both funds.

The fund rose 16.1% against the benchmark decline of 12.2%, bringing the rolling 12-month performance to 0.6% against the 2.6% returned by the MSCI All Country World Index.
Following the steep declines of December 2018, global equity markets rebounded strongly in the first quarter of 2019 (Q1-19) as the US Federal Reserve (Fed) pivoted from forecasting further rate hikes in 2019 to no further hikes until 2020 - an announcement that was well received by investors. Coupled with a reasonably good reporting season and oversold stocks, this led to the strong gains seen in most asset classes. However, it was not all positive news as the US-China trade talks continued with no sign of a resolution and Europe remains consumed by Brexit which, at the time of writing, is set to be delayed again - potentially until the end 2019.

North America was the best performing region in Q1-19, advancing 14.0%. The weakest return was from Japan, which rose only 6.9% (in US dollar terms). The Pacific ex-Japan rose 12.3% and Europe advanced 11.0% (both in US dollar terms). Emerging markets enjoyed a strong quarter, rising 9.9% but still lagged developed markets, which advanced 12.5% (both in US dollar terms). On a look-through basis, the fund is overweight North America, equal weight to Europe and underweight Japan. It is also marginally overweight emerging markets.
Amongst the global sectors, information technology (+19.2%), real estate (+15.3%) and industrials (+13.9%) rose the most. The worst-performing sectors were healthcare (+7.6%), financials (+7.7%) and utilities (+9.3%).

After a very-weak fourth quarter in 2018, all the underlying managers, bar one, rebounded strongly in Q1-19. The standout example is Coronation Global Emerging Markets which rose 23.0% over the period. The fund benefited from gains in New Oriental Education, which delivered betterthan- expected revenue gains. Chinese beer company, Wuliangye Yibin, delivered strong gains after guiding that net income will rise 40% due to strong liquor sales volumes and prices. Additionally, Airbus rose 40.4% after scrapping its unprofitable A380 aircraft and forecasting 15% growth in earnings per share in 2019.

Contrarius Global Equity delivered alpha of 4.7% quarter in Q1-19, benefiting from its exposure to the materials and communication services sectors; Fortescue Metals Group (+78.0%) benefited from a tightening in the iron ore market following the tragic collapse of a Vale mine dam in Brazil; Freeport McMoRan also rose strongly on takeover speculation; and Facebook (+27.1%) rebounded after releasing strong earnings and surmounting its regulatory issues, for now.

Tremblant Capital returned 19.0% over the period buoyed by strong gains from PagSeguro Digital (+59.4%), a Brazilian payments solutions company and Skechers (+46.8%). Coronation Global Equity Select generated a return of 17.7%, with Facebook (+27.1%), Charter Communications (+21.7%) and British American Tobacco (+29.8%) all contributing.
Lansdowne Developed Markets was slightly disappointing over the period, with a return of only 8.0% - somewhat behind the benchmark. This was most likely due to its exposure to airlines both in the US and Europe, which declined after the Boeing 737 Max 8, operated by Ethiopian Airlines, crashed in March. In addition to this, airfares are under pressure and fuel prices increased on the back of a higher oil price.

Outlook
Low interest rates and some growth can be said to be positive for stocks, but the recent swings in response to relatively-minor changes in interest rates and the outlook for growth would point towards market vulnerability. Consequently, risk remains elevated. Further, the US-China trade talks remain ongoing and, despite positive soundbites in March, could end with no agreement, which would clearly be disruptive.