1st Quarter 2011 Commentary
Equity markets continued their upward trajectory throughout January and February, months marked by outperformance of Developed over Emerging Markets, with March ending fairly flat. The portfolio slightly outperformed its MSCI EAFE & Emerging Markets Index benchmark during the first quarter of 2011. The Fund made up considerable ground over the benchmark during March, aided significantly by the relative performance of Emerging Markets, which recovered sharply as Russia delivered particularly strong performance.
A key contributor to performance was an overweight position in the Energy sector, notably from holdings in Russian oil majors, with performance being driven substantially by the spike in the price of oil as well as longer-term, demand-driven factors. An overweight in the Technology was also beneficial, with Chinese Internet giant Baidu again the single best performing holding in the portfolio. Holdings within Industrials and Financials, however, negatively contributed to relative performance as some stocks which the Fund did not own enjoyed rallies that we believe to be fleeting as they are not supported by a change in the fundamental investment case.
Portfolio turnover increased during the quarter as several important investment decisions were implemented in line with Neptune’s global sector process. As we saw the momentum of industrial production increase in Developed Markets, adding to already strong Emerging Market demand, the Fund increased its exposure to a number of high-quality, late-cycle capital spending plays focused mainly on the Industrials and Materials sectors in Japan. This was funded by the sale of a position in a major UK-based pharmaceutical stock where we see research and demand productivity declining and litigation risk increasing.
We also sold the portfolio’s Chinese bank holdings given our degree of concern over the lack of visibility for credit costs in the longer term. Elsewhere, we are reorienting the portfolio away from Consumer Staples as it continues to come under pressure from a squeezed consumer and persistent soft commodity price pressure.
Robin Geffen, Fund Manager & CEO
Neptune Investment Management
As of January 31, 2011, Baidu comprised 9.35% 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.