4th Quarter 2010 Commentary
The fourth quarter was positive for global equities, with markets ending the year strongly. The Fund performed well, outgaining its MSCI EAFE & Emerging Markets Index benchmark by a healthy margin. Positive performance came from our continued high-conviction approach and focus on global sector leaders, particularly in the Materials and Consumer Staples sectors where the portfolio was overweight, as well as in Industrials where the Japanese construction equipment manufacturer Komatsu performed well. In geographic terms, the Fund's significant exposure to Russia was especially beneficial and though market returns in China overall were muted, stock selection there was an important contributor to performance.
Activity during the quarter was relatively low, though the Fund made a noteworthy switch in the Energy sector where we switched out one China-based oil and gas firm for another. The company sold had long been a market favorite with strong organic production growth. Recent investments, however, have significantly increased the company's risk profile, which we do not believe is correctly valued into the current stock price. Therefore, we took the proceeds from that sale to take a position in another Chinese integrated oil & gas company whose potential profitability has been largely unrealised due to controls on downstream pricing. Reforms have now begun and we believe that this company's significant valuation discount is set to narrow considerably.
While there is some uncertainty as to how global financial markets will fare in 2011, we believe emerging economies will continue to drive global growth. This is despite concerns that interest-rates will need to be raised to control inflationary pressures within Emerging Markets. Inflation is apparent in some developed markets too, though concerns about the effects of tighter fiscal policy in the UK and the impact on the weaker members of the European Union by Germany make policy predictions difficult.
What is not in doubt, however, is the robust health of the corporate sector in both Developed and Emerging Markets. With many companies sitting on strong foundations for the year ahead, we think with its focus on global industry leaders the Fund is well-positioned going forward.
Robin Geffen, Fund Manager & CEO
Neptune Investment Management
As of October 31, 2010, Komatsu comprised 1.31% of the portfolio's assets.
Note: Investing in foreign markets involves the risk of social and political instability, market illiquidity, and currency volatility. Holdings in emerging markets entail the further risk of unstable legal systems, increased volatility, and even less liquidity.
Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Contact 800 992-8151 for a prospectus containing this and other information. Read it carefully. Aston Funds are distributed by BNY Mellon Distributors Inc.