Underweighting Russia Has Given Our Emerging Europe
Fund (EUROX) Positive Results
- In light of the latest round of U.S. sanctions against Russia, we feel it’s crucial to inform investors that our Emerging Europe Fund (EUROX) is underweight Russian stocks approximately 12 percent versus its benchmark, the MSCI EM Europe 10/40 Index. The fund does not currently have positions in any of the Russian firms that were highly targeted by sanctions, namely Rusal, En+ Group and GAZ (Gorkovsky Avtomobilny Zavod). In addition, EUROX is overweight Western Europe markets such as Germany and Austria and has a higher cash position than the benchmark. We recently added the Direxion Daily Russia Bear 3X Shares ETF, which seeks a daily return that is negative 300 percent of its benchmark.
- Our cautious approach speaks for itself. On Monday, April 9, the first day of trading following the imposition of fresh sanctions, EUROX fell only 5.4 percent, beating its benchmark by 80 basis points.
- EUROX is also performing well over longer periods. In an earlier note, we pointed out that the fund beat its benchmark for the 12-month period as of March 31. It returned 23.40 percent, versus the benchmark with 20.66 percent. Because of good stock selection in Turkey and Russia, among other factors, it outperformed the benchmark nearly two-to-one in the first quarter of this year.
We believe that Central and Eastern European (CEE) countries should outperform Western Europe and the U.S. long term, as they have already recovered their losses from the financial crisis 10 years ago. CEEs economies are growing around 4 percent, whereas Western Europe and the U.S. are expanding at about half the rate. What’s more, should a full-blown global trade war occur, Central Europe could be a safe haven for investors, as those economies are less exposed to international trade than more developed economies.
To learn more about the Emerging Europe Fund (EUROX), click here!
Past performance does not guarantee future results.
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.
Total Annualized Returns as of 3/31/2018
||Gross Expense Ratio
|Emerging Europe Fund (EUROX)
|MSCI EM Europe 10/40 Index
Expense ratio as stated in the most recent prospectus. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.
The MSCI Emerging Markets (EM) Europe 10/40 Index is designed to measure the performance of the large and mid-cap representation across 6 Emerging Markets (EM) countries in Europe.
Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Top 10 holdings by region in the Emerging Europe Fund as a percentage of net assets as of 3/31/2018: United Company RUSAL 0.00%, En+ Group 0.00%, Gorkovsky Avtomobilny Zavod 0.00%, Direxion Daily Russia Bear 3X Shares ETF 0.00%.
You cannot invest directly in an index.
A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001).
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.