Insights

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Uncertainty stemming from inflationary concerns, tightening central bank policies, and prospects of slowing economic activity weighed on emerging markets.  Unlike previous drawdowns, emerging market equities fared better than broad markets (MSCI EM -11.4%, MSCI ACWI’s -15.7%).  The Altrinsic Emerging Markets Opportunities portfolio outperformed the MSCI Emerging Markets Index in the second quarter by 0.6%, as measured in US dollars.   Like most equity portfolios, ours was not immune to the market downdrafts, but we are confident in our positioning and encouraged by the investment propositions offered by a growing number of companies with strong long-term fundamentals and attractive valuations.  Key contributors to our relative outperformance included our differentiated exposure to real estate, our overweight position and select investments in India, and our underweight exposures in materials and information technology.

International equities delivered their worst quarterly performance since the European sovereign debt crisis as uncertainty stemming from inflationary concerns, tightening central bank policies, and rising recession risk weighed on markets.  The Altrinsic International Equity portfolio declined 11.5% during the second quarter, outperforming the MSCI EAFE Index’s 14.5% decline, as measured in US dollars.   Outperformance was derived from all major industry exposures except real estate and utilities.  Japanese and European-based companies with meaningful US dollar exposure were notable outperformers, benefiting from the relative strength of the US dollar versus most other currencies.  We take no consolation in our relative outperformance during this painful drawdown.  Near-term macro data and corporate earnings will likely be disappointing, but we are confident in our positioning and encouraged by the investment propositions offered by a growing number of companies with strong long-term fundamentals and attractive valuations.

Quarterly Letter

Global equities delivered their worst quarterly performance since the European sovereign debt crisis as uncertainty stemming from inflationary concerns, tightening central bank policies, and rising recession risk weighed on markets.  The Altrinsic Global Equity portfolio declined 10.9% during the second quarter, outperforming the MSCI World Index’s 16.2% decline, as measured in US dollars.   Outperformance was derived from all major industry exposures except real estate, materials, and utilities.  We take no consolation in our relative outperformance during this painful drawdown.  Near-term macro data and corporate earnings will likely be disappointing, but we are confident in our positioning and encouraged by the investment propositions offered by a growing number of companies with strong long-term fundamentals and attractive valuations.

Thought Leadership

8 min read | by Rich McCormick | I spent two weeks in June traveling throughout Europe, engaging with a range of old and new contacts – political leaders, regulators, and management teams from over 40 companies in the insurance, banking, fintech, and industrial sectors.  Throughout the trip and upon my return, I kept this journal of the most significant takeaways and implications for our portfolio positioning – some reinforcements to previously-held beliefs and a few surprises.

Thought Leadership

7 min read | We continue to view the ASEAN region as one of the best sources of investment opportunity in emerging markets, presenting a unique combination of attractive valuations, recovery potential, and sustainable long-term growth.  Within the region, and considering both short- and long-term potential, we believe Vietnam is one of the most promising investment plays, unfolding in five acts.  Alice Popescu, Portfolio Manager, has written a synopsis of the play, building a case for investors to embrace the opportunity in Vietnam.

Thought Leadership

5 min read | by Alice Popescu | I recently returned from my first post-pandemic due diligence trip to Mexico.  While virtual meeting platforms proved to be a blessing during travel lockdowns, nothing compares to the insights gained and relationships that can be developed during a quality research trip.  Travelling across three major economic zones and two time zones, I visited with 15 companies, public and private, as well as a vast array of policymakers and political observers.  Broadly speaking, the infrastructure improvements, economic environment, services industry recovery, and opportunities linked to an overarching trend of “nearshoring” were impressive.  

1 min read | Stock-based compensation (SBC) in the technology sector has proliferated in recent years, driven by the war for talent and a period marked by low cost of capital, plentiful access to capital, and rising valuations. The challenge comes when decade-long market tailwinds begin to change direction. The virtuous cycle of aggressive stock issuance to employees, elevated ‘adjusted’ earnings, rising stock prices, and strong employee engagement can become vicious when it unwinds.

2 min read | In this article [click to read], we present a series of three snail charts that illustrate the evolution of corporate earnings growth estimates from 2016 through the 2023 forecast season in the US, Europe, and Japan - and discuss why we believe the data represents dangerous trend extrapolation. We expect the outlook for many companies’ earnings to come under pressure as the year progresses owing to slowing revenue growth, increasing cost pressures, and lofty embedded expectations.

4 min read |This morning the FT published an article [click to read] regarding the broadening out of market leadership and the protection that value stocks have provided for investors during the tumultuous start to 2022. These topics resonate here at Altrinsic and have been key themes in our market commentaries over the past several years. Beyond the narrative, the FT's simple charts also tell a compelling story.

The Altrinsic Emerging Markets Opportunities portfolio finished the quarter virtually unchanged (+0.1%), outperforming the MSCI Emerging Market Index’s decline of 7.0%, as measured in US dollars.   Key contributors  to our relative outperformance included our differentiated exposure to energy, financials, and communications services companies, our overweight exposure in key Latin American markets including Brazil, Chile, Mexico, and South Africa, and our significant underweight exposure in Russia and China.

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