Performance Review

International equity markets, as represented by the MSCI ACWI ex USA Index, posted a negative return in August amid persistent US-China trade tensions, Turkey’s currency crisis, and uncertainty over whether Italy’s 2019 budget proposal will comply with European Union (EU) fiscal rules. As a result, more defensive areas of the market, such as healthcare in Europe and Japan and consumer staples in Europe, showed relative outperformance.  

Value, as represented by the MSCI ACWI ex USA Value Index¹, returned -3.09% for the month, underperforming both the broader index, the MSCI ACWI ex USA Index, and its growth counterpart, represented by the MSCI ACWI ex USA Growth Index², which returned -2.09% and -1.13% respectively.  

Against this backdrop, the Fund (Class I Shares) returned -2.70% in August, underperforming its benchmark, the MSCI ACWI ex USA Index, while outperforming the MSCI ACWI ex USA Value Index.

Materials were a negative contributor as our holdings within mining companies dragged on performance after many metals softened over the month. Industrials was also a negative contributor to performance as our deeper value holdings underperformed while the market focused on more defensive areas of the market.

The main contributors came from developed and emerging Asian telecommunication services as broad-based stock selection drove performance. Energy stocks were also a significant positive contributor over the month as the oil price outperformed the broader market. Our stock selection within the sector was rewarded over the month.       

Portfolio Positioning

We continue to see opportunities across the full spectrum, from deep value in resources and Japan to high-quality yield in consumer staples and healthcare companies.

The most significant exposure remains financials. We continue to be focused on attractively valued stocks while also being conscious of the quality of the company to assess its risk.  Deep value remains within some European and Asian banks.

The recent strong performance of more defensive areas of the market led us to take profits from a number of our positions in healthcare and telecommunication services, primarily among European and Japanese companies, as these stocks performed strongly over the month.

Resources continue to be a significant holding in our portfolios. Our preferred holdings have been focused on chemicals, mining, and integrated oil & gas, which offer an attractive valuation given their quality attributes. Over the month, weakness in a number of our preferred holdings in materials led to us adding to our allocation.

In more cyclical areas we continue to find opportunities across a number of areas. We continue to be underweight technology, which comes from our lack of exposure to more expensive and very fashionable technology companies, as well as lower-quality, larger auto manufacturers. The weakness in consumer discretionary companies led us to increase our exposure as valuations become more attractive.