Nasdaq DW Global Momentum Q3 2018 commentary
|Asset classes||Global equities (including emerging markets, excluding US companies)|
|Investment style||Fundamental analysis focused on quality and value|
|Quarterly return||+1.4% (net of fees)|
|Annualised volatility (since inception)||21%|
Global stock markets, excluding US, were mixed for the quarter. Developed markets finished up +1.4% by September-end, and are flat on the year. Emerging markets remain another story. They finished down again this quarter bringing their year-to-date performance to -7.4%, which is a very large difference compared to US equities, which continue to enjoy strong gains.
The strategy closed the third quarter on a positive note up +2.9% in the month of September. However, Global stock markets have not performed as well as US markets this year, with tariff talk having detrimentally affected foreign markets, especially emerging markets. In the spring, the US dollar rallied sharply reversing a prior downtrend, and this is particularly problematic for emerging markets. If the US dollar rolls over from these levels it could be very beneficial to both developed and emerging markets.
The portfolio continues to be allocated to companies that Nasdaq DW believe to display favourable relative strength characteristics. Over the past several months, the portfolio adapted to new global leadership as trade and geopolitical tensions have continued to change the face of global markets. The portfolio and its investment process continues to adjust to new leadership trends across the globe, resulting in the biggest positions being altered significantly from this time last year.
You can find the long term track record here.
Positive returns in the strategy have been led by the developed market holdings, which have become the largest allocation within the portfolio since the start of 2018. Four of the largest five positive contributions to the portfolio came from developed markets.
Emerging Markets now comprise 23% of the portfolio, representing a reduction towards the benchmark, which currently has 17% in Emerging Markets. The allocation to Emerging Markets has continued to drop over the past 6 months from roughly 60% to the current 23% allocation. For the second month, France was one of the largest positive country contributions to the portfolio. The portfolio's allocation to Latin America, which has historically been significantly larger than the index, has shrunk over the past few months, with developed countries being preferred.
Best performing positions
- Intelsat S.A., through its subsidiaries, provides satellite communications services worldwide. The company offers a range of communications services to media companies, fixed and wireless telecommunications operators, data networking service providers for enterprise and mobile applications in the air and on the seas, multinational corporations, and Internet service providers; and commercial satellite communication services to the US government and other military organisations and their contractors. The company was founded in 1964 and is headquartered in Luxembourg City, Luxembourg. Intelsat S.A. is a subsidiary of Serafina S.A.
- SodaStream International Ltd., together with its subsidiaries, manufactures, distributes, and sells home beverage carbonation systems. Its home beverage carbonation systems enable consumers to transform ordinary tap water into sparkling water and flavored sparkling water. SodaStream International Ltd. was founded in 1903 and is headquartered in Airport City, Israel.
- Ecopetrol S.A. operates as an integrated oil and gas company. It operates through three segments: Exploration and Production; Refining, Petrochemical, and Biofuels; and Transport and Logistics. The company produces crude oil and gas; and engages in the extraction, collection, treatment, storage and pumping or compression of hydrocarbons. Ecopetrol S.A. was founded in 1948 and is based in Bogotá, Colombia.
- Galapagos NV, a clinical-stage biotechnology company, discovers, develops, and commercialises novel medicines. Its clinical stage programs include filgotinib, which is in Phase III clinical trials for the treatment of rheumatoid arthritis and Crohn's disease, Phase 2/3 trials for ulcerative colitis, and Phase II trials for multiple additional indications. Galapagos NV was founded in 1999 and is headquartered in Mechelen, Belgium.
- GW Pharmaceuticals plc, a biopharmaceutical company, engages in discovering, developing, and commercialising cannabinoid prescription medicines using botanical extracts derived from the Cannabis plant. GW Pharmaceuticals plc was founded in 1998 and is based in Cambridge, the United Kingdom.
Worst performing positions
- TAL Education Group, through its subsidiaries, provides K-12 after-school tutoring services in the People's Republic of China. It offers tutoring services to K-12 students covering various academic subjects, including mathematics, physics, chemistry, biology, history, geography, political science, English, and Chinese. TAL Education Group was founded in 2003 and is headquartered in Beijing.
- Huazhu Group Limited, together with its subsidiaries, develops and operates leased and owned, manachised, and franchised hotels primarily in the People's Republic of China. The company operates hotels under the Hi Inn, HanTing Hotel, Elan Hotel, Orange Hotel, HanTing Premium, Starway Hotel, JI Hotel, Orange Hotel Select, Manxin Hotel, Crystal Orange Hotel, Joya Hotel, Grand Mercure, Novotel, Mercure, Ibis Styles, and Ibis brand names for business and leisure travelers. Huazhu Group Limited was incorporated in 2007 and is headquartered in Shanghai.
- New Oriental Education & Technology Group Inc. provides private educational services under the New Oriental brand in the People's Republic of China. The company operates through Language Training and Test Preparation, Primary and Secondary School Education, Online Education, Content Development and Distribution, Pre-School Education, Overseas Study Consulting Services, and Study Tour segments. The company was founded in 1993 and is headquartered in Beijing.
- Noah Holdings Limited, through its subsidiaries, operates as a wealth and asset management service provider with focus on wealth investment and asset allocation services for high net worth individuals and enterprises in the People's Republic of China. The company was founded in 2005 and is headquartered in Shanghai.
- 51job, Inc., through its subsidiaries, provides integrated human resource services in the People's Republic of China. The company offers recruitment advertising services, including online recruitment services through its websites comprising 51job.com, yingjiesheng.com, 51jingying.com, and lagou.com; and mobile applications that enable job seekers to access their accounts through mobile devices and utilise functions available on their websites. 51job, Inc. was founded in 1998 and is based in Shanghai.