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Portfolio Manager, Chetan Sehgal, outlines the impact of the war in Ukraine and the resurgence of Latin America, especially Brazil.

Video Transcript – Quarterly Update

Hi, I would like to update you on the first quarter performance of TEMIT for the year 2022. The first quarter of 2022 was extremely challenging for emerging markets as there was a lot of dislocation due to the Russian invasion of Ukraine. On a longer-term basis, the war in Ukraine has a lot of implications for emerging markets.
 

“Western Europe seems quite determined in trying to wean itself from dependence on Russian energy. “

As you know, emerging markets comprise a lot of countries which are producers of energy, as well as a lot of countries which are consumers of energy. A lot of the producing economies are now benefiting as a result of high energy prices, but longer term, if Europe is to make good on its projections, we believe that there is a chance that energy prices could even come down to below trend over the medium term.

The TEMIT trust is geared towards such a long-term trend. So, while the current portfolio performance is impacted as a result of high energy and commodity prices, we believe that over the medium term, as the energy and commodity prices correct, we'll find that the TEMIT trust will start to outperform once again.
 

“We know it's been an extremely challenging time, but we believe that this is the best strategy from a longer-term perspective.”

The major detractors for TEMIT was the overweight in Russia. The Russian market underperformed the MSCI Emerging Markets, as most of the stocks got suspended as a result of the Russian war on Ukraine.

The other detraction came from the lack of exposure to the middle Eastern markets which collectively added around 1.5% to the detraction - these markets did extremely well as a result of higher energy prices as a result of the war on Ukraine.

The trust benefited from its exposure to the Brazil market which rebounded after a terrible 2021. The trust was overweight in that market, and we felt that both the currency, as well as the stock valuations, were quite cheap in Brazil.
 

“Brazil has been a major contributor for the trust in the first quarter of 2022. “

What Are the Risks?

All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments. China may be subject to considerable degrees of economic, political and social instability. Investments in securities of Chinese issuers involve risks that are specific to China, including certain legal, regulatory, political and economic risks.

References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund’s holding at any one time.

For illustrative/discussion purposes only. It is not a recommendation to purchase, sell or hold any particular security. It is neither indicative of any portfolio holdings at any one time nor reflective of current or future portfolio holdings. Past performance is not necessarily indicative nor a guarantee of future performance.