Market Review
The benchmark MSCI Asia Pacific ex-Japan declined -3.9% during the first quarter of the calendar year. Emerging markets have trended down together with developed country equity markets.
For European investors investing in Asia, the strength of the Euro against global currencies remains a headwind also in 2018 so far.
NESTOR portfolio companies saw a positive trend in revenue and earnings announcement for either the second half of 2017 or the final quarter of the year.
Performance Review
The NESTOR fund remains ahead of the index for the financial year. In the past quarter strong outperformance was generated primarily through the non-index allocations to thematic investments.
The strongest contributions came from the thematic exposures to domestic saving and healthcare working out positively. Detractors were a Chinese exporter amid trade uncertainty and an Indonesian outperformer giving back some of its prior gains.
Outlook and Strategy
The main regional events for investors were of more of psychological than fundamental nature: the US-China relationship around global trade and North Korea, as well as a general weakness and rising volatility in global equity markets. Aside from the North Korea issue, Asia in that sense has been a “news-taker” and as share prices get moved around by short term market reactions to the latest newswire or tweet, the NESTOR funds look to capitalize on long-term opportunity in the shares of Asian companies. The existing NESTOR fund strategy generally emphasizes domestic demand themes, and thus shows little direct fundamental exposure to global trade.