The 2nd quarter was a story of mixed fortunes for the FMG Rising 6 Fund, with asymmetric performance across certain regions which we’ll explain below. Overall, the general feeling of the market was very strong and we saw a recovery in most of the higher beta names such as Brazil, Russia and Korea. Concerns of an EM sell off following the BREXIT vote were shrugged off as the performance of all major developed and emerging equity markets was outstanding in the week post BREXIT. We are in the camp of BREXIT being a blip in the overall economic and market impact for 2016.
As mentioned, there were some laggard regions within the Fund which disappointed and reduced our upside. Despite all the monetary stimulus and the improving economic data coming of out Beijing, the China A Share market continues to disappoint and returned just 2% for the quarter. In Africa, our positioning in Nigeria suffered a setback.
On the positive side, we were positioned beautifully as our 2 largest exposures (Brazil and Russia) each returned double digit growth figures for Q2 (x% and x% respectively). Rousseff’s impeachment was a great victory for Brazil and the new President Temer is being touted to be the man to turn Brazil’s fortunes round, with the BOVESPA returning a whopping 35% up to June. Russia, whose correlation to oil has increased since sanctions were put in place, also returned double digit growths in Q2.
Currently, we believe that our positioning is optimal with an 17% weighting in each of Brazil, Russia and India. We have lowered our exposure in China to 10% but look to jump on the bandwagon as soon as we see any signs of market recovery. The remainder of the portfolio is more or less equally weighted amongst Africa and MENA. Data source: Bloomberg