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Emerging Markets once again rallied in the 3rd quarter, following a very good recovery since the January market rout. Taking a look at the MSCI EM index, we are now trading at the May 2015 price levels, and all the interim losses have since been recovered.

It was a decent quarter for the Fund, with a mix of very good positioning in Russia and Brazil as opposed to underperforming exposures such as China, MENA and Africa.

Going into Q3, we positioned the Fund for higher beta plays, namely Brazil and Russia, with a 20% allocation in each. Brazil had an outstanding third quarter, up 11% and 65% for the year. Our view is that Brazil is a short-term play and we are bullish on market valuations.  Russia had a very good quarter with the RTSI Index up 7%; there was no o major news on the economic front and the performance was purely due to Russia being a high beta play on what was a very good quarter in general in EM.

The main detractors of the Fund’s performance were China A, MENA and Africa (+2%, -4% and -1% respectively). Whilst there was nothing fundamentally wrong therewith, after shrugging off BREXIT, the market was in extreme risk-on mode and these uncorrelated, idiosyncratic markets were basically “neglected”.

Going into last quarter for 2016, the Fund has its largest exposures in India and Brazil (22% and 18% respectively), and Africa at 16%. We took some profit in Russia and brought down our exposure to 12%. Our allocations to China and MENA remained intact at roughly 11% each.

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