For the third quarter, the Fund returned 6.23% as compared to the 5.77% return of the Funds benchmark, the MSCI Emerging Markets Index. Emerging markets underperformed developed markets for the quarter, as measured by the MSCI World Index return of 8.18%.
Emerging market performance in the third quarter represented a significant improvement over the prior quarter, when emerging markets suffered from investor concern regarding the potential for the U.S. Federal Reserve to begin tapering its asset purchases in September. One effect of the fear over tapering was a flight from several emerging market currencies, most prominently in India where currency impact accounted for more than half of that markets negative performance. After the Feds meeting in September in which no action to taper was announced and which featured a downgraded forecast for U.S. growth, emerging markets enjoyed a strong rally.
Emerging market country returns were varied during the quarter, with 11 of the 21 countries in the Index posting positive returns. This was a vast improvement from the second quarter when only three countries had positive performance. The top performers were Poland, Korea, Russia and the Czech Republic, returning 17.17%, 14.90%, 13.60% and 13.27%, respectively. The worst performance came from Indonesia, which returned -23.96%, followed by Turkey with -6.73% and Chile with
-5.57%. The only sector with negative performance was consumer staples, returning
-0.23%. The top sector performers were energy at 10.64%, consumer discretionary at 9.04% and materials at 9.00%.
Select stocks on the basis of quantitative analysis with the aim of producing a portfolio that will approximate the performance of the MSCI Emerging Markets Index.
- Maintain industry diversification, country weightings, market capitalization and other financial characteristics similar to the Index.
- Buy and sell securities in response to changes in the Index.