Emerging markets finished the year strong and outpaced developed equity markets in the quarter. The MSCI Emerging Markets Index closed the fourth quarter up 7.4% outpacing the MSCI World ex US Index return of 4.2%. Asia emerging markets were strong on the back of Chinese Internet and financials and South Korean information technology companies. India was also a strong performing market. South Africa experienced a significant turnaround, rallying 21.4% following the election of Cyriul Ramaphosa. Latin America trailed as Mexico was down 8.1% and Brazil was down 2.0%. On a sector basis, healthcare companies gained 16.6% led by companies in South Korea, China and Malaysia. Financials also outperformed, particularly South African bank stocks, which were up nearly 38.0%. Sectors lagging the Index during the quarter included utilities, telecommunications services and industrials.
The Active M Emerging Markets Equity Fund trailed the MSCI Emerging Markets Index's return of 7.44% on a relative basis during the quarter, returning 6.32%. Stock selection within the information technology sector was most challenging during the quarter, as the Fund's holdings in smart phone contracted manufacturers declined. Exposure to mall properties in the Middle East relative to limited exposure to real estate in China hurt relative returns. Overall, stock selection in China was a drag on relative returns. Lagging holdings, in the Pacific ex-China region, specifically South Korea, also weighed on relative returns. Internet-related and retail exposure within South Africa was particularly beneficial as was exposure to more commodity related holdings in Brazil.
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