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Going into 2016 the Fund was cautiously positioned with an elevated cash buffer of 45%, as our universe was looking bleak and we were getting bearish signals from our technical models. This move played out well as we managed to cushion the downside as global stock markets plunged in January. The market drop created an opportunity for us to get back into a select number of frontier equity markets, mainly in Southeast Asia and Latin America, bringing down the cash level to around 20%. All of the broad frontier market indices ended the quarter in negative territory except for Central & Eastern Europe, while Asian and African frontiers were the underdogs, both down by 5%. Relatively speaking frontier markets had a tough quarter as they failed to keep up with the rebound in the more liquid and recently more volatile emerging markets. However, a weaker US dollar and a sharp rebound in commodities have strengthened the case for frontier equity markets. Our universe is looking attractively valued at below 10x earnings and flirting with a 5% yield. Relative to emerging markets they are trading at an all-time high discount of over 40%. On an absolute basis the markets have not traded at such low valuations in over a decade. Sources: Bloomberg

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