Third Quarter 2017

During the third quarter, the Emerging Europe Fund gained 10.25 percent, beating its benchmark, the MSCI Emerging Europe 10/40 Index, which appreciated 10.16 percent.  See complete fund performance.

Past performance does not guarantee future results. 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.

Russian and Czech equities outperformed the index of emerging countries, while Polish, Hungarian, Turkish and Greek bourse underperformed. On a sector basis, consumer staples, materials and telecommunication service outperformed. Meanwhile, utilities, energy, financials, industrials, consumer discretionary, health care, and real estate underperformed.


  • The fund’s stock selection in Russia, Turkey and Poland had the largest positive contributions to the fund’s performance this quarter.
  • The fund’s stock selection in financials and overweight in materials had the largest positive contributions to the fund’s performance this quarter.
  • Sberbank made the largest single contribution to the performance of the fund.


  • The fund’s higher cash level and stock selection outside of Eastern Europe had the largest negative contribution to the fund’s performance this quarter.
  • The fund’s overweight in information technology and underweight in consumer staples sector had the largest negative contribution to the fund’s performance this quarter.
  • Alpha Bank was the greatest absolute detractor to the fund’s performance during the quarter.


  • Central Emerging Europe economies continued to grow, outpacing the richer West. Economies in most of the European Union’s (EU) eastern wing exceeded expectations as consumer spending and increase in investments pushed growth higher. Romania’s gross domestic product (GDP) surged to 5.9 percent in the second quarter from a year earlier. The Czech economy grew at 4.7 percent, the Polish economy at 3.9 percent. Hungary’s economic growth improved at the slowest rate of 3.2 percent, which still outpacing the euro area’s annual growth of 2.2 percent.
  • The Financial Times Stock Exchange (FTSE) announced that Poland will be reclassified from Advanced Emerging Markets to the Developed Markets universe, effective as of the semi-annual review in September 2018. Poland is the first Central and Eastern European market to join the FTSE’s Developed Markets universe. The upgrade may attract new investors to local equities.
  • Russia’s central bank resumed monetary easing, cutting its main rate by 50 basis points, from 9.0 percent to 8.5 percent, after inflation fell to a record low. The bank’s governor, Elvira Nabiullina, has said the key rate can reach its nominal equilibrium level of 6.5-7 percent once inflation is stable at 4 percent for one to two years. Most analysts expect more cuts to follow.


  • In a speech, French president Emmanuel Macron called for a more integrated Europe and a common budget for all euro members. But this may be harder to accomplish after the German elections. Angela Merkel won a fourth term as chancellor, but her party suffered large losses. The right-wing, anti-immigration Alternative for Germany (AfG) party won 13 percent of the vote and is now the third-largest party in the Bundestag. The liberal Free Democratic Party (FDP), which favors a multi-speed Europe, gained a large number of seats in the parliament as well. It may take weeks or months to form a new government in Germany and the chancellor may have to focus more on domestic matters going forward. 
  • Big brokers are warning investors that the stronger euro may put pressure on European earnings. Also, the stronger euro increases the chance of a delay in the quantitative easing (QE) decision or a more gradual phasing out of the European Central Bank’s (ECB) asset purchase program. Euro appreciation is already causing monetary tightening and is equivalent to interest rate rises, according to Reuter’s publication. Deutsche Bank is projecting that every 10 percent rise in the trade-weighted euro lowers earning per share by 5 percent. The euro is among the best performing currencies of 2017 as of October. 
  • Catalonia, which generates more than one-fifth of Spain’s economy, held a referendum showing that about 90 percent of those voting backed independence. However, the turnout was low at just over 40 percent. Under Spanish law, the referendum is considered illegal. Should Catalonia declare independence, other parts of Europe may follow its example. Italy's wealthy regions of Lombardy and Veneto are both eyeing referendums aimed at gaining more autonomy.

The MSCI Emerging Markets Europe 10/40 Index is a free float-adjusted market capitalization index that is designed to measure equity performance in the emerging market countries of Europe (Czech Republic, Greece, Hungary, Poland, Russia and Turkey). The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The index is periodically rebalanced relative to the constituents' weights in the parent 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).

Holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings are reported as of the most recent quarter-end. Holdings in the Emerging Europe Fund as a percentage of net assets as of 9/30/2017: Sberbank of Russia PJSC (10.71%), Alpha Bank AE (0.93%).


Net Asset Value
as of 01/22/2018

Global Resources Fund PSPFX $6.47 0.05 Gold and Precious Metals Fund USERX $7.78 No Change World Precious Minerals Fund UNWPX $4.73 0.07 China Region Fund USCOX $12.57 0.19 Emerging Europe Fund EUROX $7.88 0.11 All American Equity Fund GBTFX $26.19 0.16 Holmes Macro Trends Fund MEGAX $20.38 0.13 Near-Term Tax Free Fund NEARX $2.21 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change