Friday, July 1, 2016

Performance of the AIM International Equity Fund as of 6/30/2016


Here is a quick view of the performance of the AIM International Equity Fund for the period ending on June 30, 2016. The AIM Class of 2017 began their tenure managing the AIM Funds on April 1, 2016; therefore this represents their first quarter performance results.


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As the chart above shows, 2016 has been a challenging year to manage international equities (i.e. negative interest rates, Brexit, energy price volatility, and currency fluctuations). Both the benchmark and the AIM Intl Equity Fund posted negative returns over the past year. The past three months have been particularly challenging for all international fund managers. 

The AIM International Equity Fund under-performed the benchmark (Russell Global Ex US Index) for the second quarter – posting a negative return of -1.74% versus +0.22% for the benchmark.  



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The Health Care, Materials, and Energy sectors were the major under-performers; while Consumer Discretionary was the best over-performing sector. Even though a sell order was placed, Allergan plc in the Health Care sector dropped nearly 20% during the first week of the quarter before the order was executed. BioAmber in the Materials sector dropped 30% during the quarter and has triggered a sell order. Lazard and Associated British Foods (both negatively impacted by the Brexit vote) also triggered sell orders. These three stocks are being replaced on July 1 by ACWX - iShares MSCI ACWI ex US Index ETF in accordance with the AIM investment policy statement.

The following table shows all individual holdings during the quarter by sector and versus the benchmark.

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The best performers for the quarter were: Sberbank Russia in the Financial Services sector + 34%; Tata Motors in Consumer Discretionary +19%; Vedanta in Materials +43%; and NTT DOCOMO in Telecommunications +18%.
  

The table below shows that the portfolio remains sector neutral per the range established within the AIM investment policy statement. The next portfolio sector adjustments will occur in early September following the students return to campus.

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Performance of the AIM International Fund during Q2 2016 was negatively impacted by the large under-weight in Japan (a 13% under-allocation) and a nearly 25% over-weight in North America. Additionally, the AIM Fund had a 5% overweight to the United Kingdom during the second quarter which also contributed to the Fund's under-performance. The AIM Intl Equity Fund's exposure to the UK is the largest of any individual country (with a nearly 19% overall allocation).

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The next table displays the top 10 holdings as of 6/30/2016. It is noted that no individual holding exceeds a 3% portfolio position.

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The following table shows the key characteristics of the AIM International Fund as of 6/30/2016. For the most part, the AIM Fund is of higher quality than the overall benchmark.

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Additional AIM Intl Fund characteristics by sector are provided in the next table.

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The next slide is FactSet's style chart for the AIM International Fund.

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The AIM International Equity Fund should be well positioned for the remainder of the summer with no significant sector exposure. If the overall equity market in Canada, Mexico and Bermuda (North American holdings) outperform Japanese holdings, then AIM Fund should generate positive alpha.

As soon as the students return to campus they will be presenting new stocks for consideration. Each Friday afternoon there are equity presentations delivered by the AIM students - either in the AIM Room or at area investment companies. 

Every AIM equity write-up since the inception of the program in 2005 can be found on the AIM website at: http://business.marquette.edu/centers-and-programs/aimp-student-equity-write-ups.






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