Fund Finds Opportunities in Asia, Sub-Saharan Africa, South America
SALT LAKE CITY -- (Business Wire)
Frontier Emerging Small Countries Fund (WAFMX) completed its first
year with strong performance driven by stock picks in Nigeria and the
Philippines. According to Morningstar, the Fund’s absolute rank was #1
out of 553 Diversified Emerging Markets funds based on total return for
the 12 months ending January 31, 2013.
Portfolio Manager Laura
Geritz attributes the strong results to good security selection and
a focus on stocks benefiting from local economic growth, not
developed-country demand. From inception on January 31, 2012 through
January 31, 2013, the Wasatch Frontier Emerging Small Countries Fund was
up 36.17% versus 20.94% for the MSCI Frontier Emerging Markets Index and
16.73% for the MSCI Frontier Markets Index (which is highly skewed
toward the value markets in the Middle East). For the 11 months ending
December 31, 2012, the Wasatch Frontier Emerging Small Countries Fund
was up 32.16% versus 15.41% for the MSCI Frontier Emerging Markets Index
and 8.69% for the MSCI Frontier Markets Index
Data shows past performance, which is not indicative of future
performance.Current performance may be lower or higher than the
data quoted.To obtain the most recent month-end performance data
available, please click
here.The Advisor may absorb certain Fund expenses,
without which total return would have been lower.Investment
returns and principal value will fluctuate and shares, when redeemed,
may be worth more or less than their original cost.Total
Expense Ratio:3.64%, Net: 2.25%
We asked Ms. Geritz some questions about frontier markets and the Fund’s
First, how do you define frontier markets and emerging small
countries, and why do you believe there are investment opportunities in
These are the smaller countries that many believe to be a subset of
emerging markets. We invest in publicly listed companies across Asia,
Africa, the Americas, the Middle East and Europe. The long-term
fundamentals of places like Sri Lanka, the Philippines, Nigeria, Kenya,
Colombia, Peru, Mexico and Turkey continue to converge with the
developed world, and benefit from demographic advantages and healthier
balance sheets. Plus, the asset class offers attractive dividend yields.
We believe frontier markets and the smaller countries among traditional
emerging markets represent significant long-term opportunities for
investors willing to do their homework and put boots on the ground. Many
companies in frontier markets and emerging small countries have limited
analyst coverage and offer untapped growth potential. We believe these
markets are in the early stages of a long-term investment cycle. Our
goal is to find the next generation of potentially large emerging
markets – the next BRICs (Brazil, Russia, India, China), Koreas and
Your Fund has a significant weighting in Africa, particularly Nigeria.What opportunities do you see there?
The key markets in Sub-Saharan Africa – Nigeria and Kenya – were
among the world’s top performers over the past 12 months. The common
thread is that these markets are the least tied to outside events –
mainly the whims of developed-markets politicians. And many have had
strong political and economic news over the last few years.
One of my biggest frustrations about Africa is investor and media
ignorance of it. Sub-Saharan Africa has all the right ingredients to be
a multi-decade story for investors in frontier markets – great
demographics, low debt levels, low correlations with global markets,
strong economic growth and increasing consumer demand. Not to mention it
is a continent of beauty with charming, friendly people.
What other countries do you like?
We like the Philippines, given its low credit penetration and
impeccable demographics. Turkey has also been a breath of fresh
air compared to the rest of Europe, which is still wrestling with debt.
In addition, we like Egypt with its large population and stunning
demographics. Pakistan, a world market leader last year, has
controlled inflation while reducing interest rates, which has meant a
bump in consumer spending and stock-market performance. Countries like Bangladesh
and Sri Lanka, though they’ve lagged, are likely to benefit from
their robust demographics and low cost of labor, taking share from
places like China where manufacturing has gotten more expensive.
What investment themes traverse these economies?
Fifty-three percent of the Fund is in consumer staples. Most of the
companies we invest in generate sales in their local markets and benefit
from growing populations and increased consumer demand. A recent video
of our visits to companies in Nigeria, Egypt, Morocco and the
Philippines shows some of these consumer-driven opportunities. To watch
the video on YouTube, click
here or go to: www.youtube.com/wasatchfunds.
Are frontier markets fairly valued?
Frontier markets trade at a trailing P/E ratio of 10.6 on average, a
significant discount to emerging markets in general, which trade at a
P/E ratio of 12.7 on average. Growth and economic fundamentals in
frontier markets are also good, especially compared to overall weak
global economic growth. Plus, frontier markets continue to see decent
inflows with trading volumes recently picking up.
Frontier markets lagged emerging markets overall in 2012, and there was
significant disparity between individual markets in the MSCI Frontier
Emerging Markets Index. Individual country performance was relatively
uncorrelated, providing an additional layer of potential diversification
as each market is driven by unique factors. We look for pockets of
opportunity where markets and stocks are inexpensive compared to their
Does your Fund have similar country weightings as the Index?
No. The Fund has significant flexibility to pursue returns differently
from the Index. Compared to the MSCI Frontier Emerging Markets Index,
our country allocations are more broadly diversified with very different
weightings. For example, 59% of the Index is accounted for by its four
most heavily weighted countries (Colombia, the Philippines, Kuwait and
Peru). The Fund’s four highest weightings are a completely different
group (Nigeria, Kenya, South Africa and Sri Lanka) and represent 47% of
its non-cash assets.
How should investors incorporate frontier markets and emerging small
countries into their portfolios?
A fund like ours is a diversifier for an investor’s portfolio. Because
these markets are more heavily driven by local (home-country) demand,
they tend to be less correlated with the rest of the world.
To learn more about the Frontier Emerging Small Countries Fund and
Wasatch’s view on emerging markets in general, please refer to the white
Markets: A Case for Targeted Approaches. In addition to the
Frontier Emerging Small Countries Fund, Wasatch also manages the Emerging
Markets Small Cap Fund (WAEMX) and the Emerging
Markets Select Fund (WAESX).
About Laura Geritz, CFA
Ms. Geritz joined Wasatch Advisors in 2006 andserves as the Lead
Portfolio Manager of the Wasatch Frontier Emerging Small Countries Fund.
She also serves as a Portfolio Manager of the Emerging Markets Small Cap
Fund and the International Opportunities Fund with Roger Edgley,
Wasatch’s Director of International Research. Prior to joining Wasatch
Advisors, Ms. Geritz was with Mellon Corporation. She received a
Bachelor of Arts degree in Political Science and History and a Master’s
degree in East Asian Languages and Cultures from the University of
About Wasatch Advisors®
Wasatch Advisors is the investment manager to the Wasatch
Funds®, a family of no-load mutual funds, as well as
separately managed institutional and individual portfolios. Wasatch
Advisors pursues a disciplined approach to investing, focused on
bottom-up, fundamental analysis to develop a deep understanding of the
investment potential of individual companies. The portfolio managers
employ a uniquely collaborative process to leverage the knowledge and
skill of the entire Wasatch Advisors research team in making investment
decisions. Wasatch Advisors is an employee-owned investment advisor
founded in 1975 and headquartered in Salt Lake City, Utah. The firm had
$14.2 billion in assets under management as of January 31, 2013. Wasatch
Advisors, Inc. is registered with the Securities and Exchange Commission
under the Investment Advisers Act of 1940.
RISKS AND DEFINITIONS:
The Morningstar absolute rank is the rank of a fund among its
category peers, which rank is based on a comparison of a fund’s total
return performance against its peers over the stated time period (in
this case, the 12 months since inception of the Wasatch Frontier
Emerging Small Countries Fund).Past performance is no guarantee
of future results.© 2013 Morningstar, Inc.All rights
reserved.The information contained herein (1) is proprietary to
Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete, or
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responsible for any damages or losses arising from any use of this
Total Annual Fund Operating Expenses include direct expenses paid to the
Advisor, before any expense reimbursements by the Advisor. The
Advisor has contractually agreed to limit certain expenses to 2.25%
through at least January 31, 2014. See the prospectus for additional
information regarding Fund expenses.
Wasatch Funds will deduct a 2.00% redemption proceeds fee on Fund
shares held 60 days or less.Performance data does not reflect
the deduction of fees or taxes, which if reflected, would reduce the
performance quoted.For more complete information including
charges, risks and expenses, read the prospectus carefully.
Mutual fund investing involves risks and loss of principal is
possible.Investing in small cap funds will be more volatile and
loss of principal could be greater than investing in large cap or more
diversified funds.Investing in foreign securities, especially in
frontier and emerging markets, entails special risks, such as unstable
currencies, highly volatile securities markets and political and social
instability, which are described in more detail in the prospectus.Being
non-diversified, the Fund can invest a larger portion of its assets in
the stocks of a limited number of companies than a diversified fund.Non-diversification
increases the risk of loss to the Fund if the values of these securities
An investor should consider investment objectives, risks, charges
and expenses carefully before investing.To obtain a
prospectus, containing this and other information, visit www.WasatchFunds.com
or call 800.551.1700.Please read the prospectus carefully
The MSCI Frontier Emerging Markets and MSCI Frontier Markets indices
are free float-adjusted market capitalization indices designed to
measure equity market performance in the global frontier and emerging
markets.You cannot invest in these or any indices.
Source:MSCI.The MSCI information may only be used for
your internal use, may not be reproduced or redisseminated in any form
and may not be used as a basis for or a component of any financial
instruments or products or indices.None of the MSCI information
is intended to constitute investment advice or a recommendation to make
(or refrain from making) any kind of investment decision and may not be
relied on as such.Historical data and analysis should not be
taken as an indication or guarantee of any future performance analysis,
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“as is” basis and the user of this information assumes the entire risk
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foregoing, in no event shall any MSCI Party have any liability for any
direct, indirect, special, incidental, punitive, consequential
(including, without limitation, lost profits) or any other damages.(www.msci.com)
The investment objective of the Wasatch Frontier Emerging Small
Countries Fund, the Wasatch Emerging Markets Small Cap Fund and the
Wasatch Emerging Markets Select Fund is long-term growth of capital.
The Wasatch Frontier Emerging Small Countries Fund and the Wasatch
Emerging Markets Select Fund are new and have limited operating history
that is not likely to be duplicated and may not be indicative of future
long-term returns or rankings.
Dividend yield is a company’s annual dividend payments divided by its
market capitalization, or the dividend per share divided by the price
per share.For example, a company whose stock sells for $30 per
share that pays an annual dividend of $3 per share has a dividend yield
Correlation, in the financial world, is a statistical measure of how
asset classes, securities, markets, or countries move in relation to
The Price-to-Earningsor P/E ratio is the price of a stock
divided by its earnings per share.
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are provided by Wasatch Advisors, Inc., a federally regulated Investment
© 2013 Wasatch Funds.All rights reserved.Wasatch
Funds are distributed by ALPS Distributors, Inc. (ADI).Steve
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For Wasatch Advisors
Jody Lowe, 414.322.9311
Source: Wasatch Advisors
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