Multi-Manager Emerging Markets Equity
as of March 31, 2014
Fund Commentary
The MSCI Emerging Markets Index returned -0.43% during the first quarter, slightly lagging developed market stocks. The quarter got off to a rocky start, with emerging market stocks falling more than 6% in January. The asset class then rebounded in both February and March, posting returns of more than 3% in U.S. dollar terms, despite concerns over Russia’s occupation of the Crimean peninsula in late February. Frontier markets and smaller-cap emerging market stocks performed well in the quarter, returning 7.40% and 3.50%, respectively. From a sector perspective, technology and consumer discretionary were the top-performing sectors in the first quarter. More defensive areas such as utilities and health care also posted positive results. Telecommunications services declined sharply, falling close to 6% for the quarter.

The Multi-Manager Emerging Markets Equity Fund finished slightly higher than the benchmark, returning -0.37% compared with the MSCI Emerging Markets Index return of -0.43%. The Fund’s overweights to information technology and consumer stocks contributed to relative results. The Fund performed particularly well in the Pacific and Latin America regions. At the end of the quarter, the Fund was underweight the Pacific, including China, while overweight the Middle East and frontier markets.

Sub-adviser performance was within expectations. Westwood delivered the strongest results, benefiting from zero exposure to Russia and a significant underweight to China. Following a very strong year, Pzena underperformed during the quarter, with Brazilian and Asian stocks lagging. Pzena also had an overweight to Russia, which was subtractive during the period.
Investor Profile

If you're a long-term investor looking to diversify your investments by pursuing the growth potential of emerging and frontier market equities, then this Fund may be right for you. It is intended for investors who are aware that foreign markets may involve additional risks, such as social and political instability, reduced market liquidity and currency volatility.

Investing in emerging markets entails extra risk. The securities markets of emerging countries are less liquid, more volatility, and less regulated than the markets of more developed countries. This risk is magnified in frontier countries since they generally have smaller economies or less developed capital markets than traditional emerging markets.

  • Invest at least 80% of net assets in equity securities of emerging and frontier markets — emerging and frontier markets are defined as markets in MSCI Emerging Markets Index and MSCI Frontier Markets Index.
  • Select complementary managers from a broad universe of investment managers.
  • Blend managers into a single fund in an effort to provide an attractive combination of risk and return.
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