Emerging Markets Equity Commentary | Q1 2018

Quarterly Letter

Volatility returned in the first quarter as investors reassessed the potential impact of rising interest rates, the reversal of quantitative easing (QE), and the increasing trade tensions between the U.S. and China.  The Perterra Emerging Markets Fund, LP was down 2.7% during the quarter, while the MSCI Emerging Markets Index gained 1.4%, as measured in U.S. dollars.  Performance was below our expectations, weighed down by our consumer holdings and the continued momentum of the crowded technology and financial sector leaders.  Having sold these stocks given their extended valuations, we have been redeploying capital to undervalued companies in Latin America, where sentiment is depressed due to election fears and ongoing renegotiations of the NAFTA accord.  Attributes embedded in the portfolio include balance-sheet strength, high free cash flow generation, and resilient earnings growth.