The FMG Rising 3 Fund registered a strong performance for Q2 of 2016. With the major sell off in Emerging Markets behind us, the market was on fire, particularly those which have a high market beta nature such as Russia. Market sentiment definitely changed in April and we have witnessed a very strong rally on all risky assets. The return of oil prices to $50 per barrel helped.
The main negative headline was the unexpected vote the British people took in favour of an EU exit. Whilst the day after there was a slight panic in the markets, the way equities reacted was particularly testament to the fact that currently equity markets, especially EM, are in risk on mode. Within the 3 regions that the Fund invests in, there were no major economic events other than better than expected economic data coming out of China and the non-inclusion of the China A Share market with the MSCI index list. Both were non-events really as China was flat throughout the 2nd quarter.
The Fund was optimally positioned as we loaded on our Russia exposure (at one point to 42%), benefitting from the rally in stocks such as Sberbank, Lukoil and Gazprom. We closed the month with a 95% exposure to markets (40% Russia, 30% India and 25% in China). Whilst this rally has not run out of steam in our opinion, we may look at taking some profits occasionally particularly in Russia. Data source: Bloomberg