Quarterly Manager Commentary Q2 2017

Dear Friends,

Emerging markets continue to enjoy a strong year. In fact, emerging markets have outperformed the global index every month so far in 2017. Two of the key components benefiting most emerging markets are the weak crude prices and a weakening US dollar, as both help keep inflation in check. Further drivers include strong earnings reports, good economic data from the second largest economy in the world, China and favorable investor asset allocations.

The world’s largest economy, the USA, raised interest rates for a second time during the quarter in response to hitting its lowest unemployment rate in 16 years at 4.3% as a result of positive job creation for nearly seven years. The US economy is expected to grow at +2% this year and provides ‘safety’ across the globe with a stable and moderately strong economy. India continues to be the big winner this year, up 22% given strong economic growth and therefore attracting both domestic and foreign investors to the equity market.

The outlook for emerging markets looks favorable, especially compared to the sluggish growth seen in the West. These benefit from strong consumer growth, young populations, expanding the middle class, and transformational use of technology via smart phones leap-frogging the time-gap vis-à-vis developed markets. Key valuation metrics like price-earnings, dividends yields, and price-to-book remain in favor of emerging markets.