Third Quarter 2020

The Emerging Europe fund lost 3.69 percent in the third quarter 2020, outperforming its benchmark, the MSCI Emerging Markets Europe 10/40 Index, which lost 5.05 percent. See complete fund performance here.

The Emerging Europe Fund outperformed its index by 136 basis points due to its defensive positioning and good stock selection. The summer months contributed to the spread of coronavirus infections in Europe, especially in tourist-populated areas. The growing number of infections once again put pressure on equites. However, the fund’s higher cash level, Turkish lira hedge, superior stock selection in Russia and the decision to overweight Romania had the most positive effect on the fund’s performance against the index.

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.


  • On the country level, the fund’s overweight position in Romania and stock selection in Russia had the most positive effects on the fund’s performance relative to the index. In Romania, the strategy to overweight regional banks worked well. Shares of BRD Bank gained 16.4 percent and Banca Transilvania gained 15.1 percent. Romania is not part of the MSCI Emerging Europe Index, as MSCI classifies Romania as a Frontier Market. FTSE changed Romania’s classification from Frontier Market to Emerging Market in September. In Russia, stock selection in the metals and mining industry helped the most. The strategy to overweight Russian gold producers worked especially well.
  • On the sector level, the fund’s stock selection in financials and materials had the most positive effect on the fund’s performance relative to the index. As noted above, the overweight strategy of Romanian banks worked well and overweight Russian online bank TCS Group had a positive impact on the fund’s performance. TCS Group shares gained 32.4 percent. This lender is not part of the MSCI Emerging Europe 10/40 Index. In materials, overweighting eastern European precious metal producers helped the fund outperform its benchmark.
  • The top three positive contributors were as follows:
    • Currency hedges contributed a positive 65 basis points to the fund’s performance. The fund’s strategy to protect assets from the Turkish lira depreciation worked well.
    • Polyus PJSC The Russian gold producer contributed a positive 50 basis points to the fund’s performance. Gold producers gained with the increase in the gold price during the time of uncertainty. We like Polyus for its strong operational results, high gold reserves and low cost of production. Polyus is a leading Russian gold producer, and one of 10 leading gold miners worldwide.
    • Evraz PLC The Russian steel producer contributed a positive 42 basis points to the fund’s performance. The company continued its recovery from the low mid-March levels. We like Evraz for its strong cash flow from operations and high dividend, yielding more than 10 percent annually.


  • On the country level, the fund’s slight overweight position and stock selection in Turkey had the most negative effect on the fund’s performance relative to the index. In particular, exposure to the medical sector and food retailers had the most negative effect. Shares on Migros, a food retailer, declined by 7 percent and Sok Marketler lost 15.4 percent. Neither company is part of the index. In the medical sector, shares of health care provider Mlp Saglik Hizmetleri lost 31 percent in the three months after reporting a net loss of 50 percent year-over-year. On a positive note, the Emerging Europe Fund was hedging its exposure to Turkish assets and was able to offset some losses coming from equites by gaining from currency hedges. The lira depreciated against the dollar by 12 percent in the third quarter.
  • On the sector level, the fund’s stock selection in consumer staples and health care had the most negative effect on the fund’s performance relative to the index. In particular, stock selection in food retails did not work well. Turkish food retailers underperformed. In health care, holding Turkish Mlp Saglik Hizmetleri, as discussed above, did not work well.
  • The top three negative contributors were all Russian stocks:
    • Lukoil PJSC The largest private Russian oil producer contributed a negative 172 basis points to the fund’s performance. Its share price underperformed with weak oil price. We like the company for its strong balance sheet and robust cash flow generation from operations as well as its high dividend yield.
    • Surgutneftegas PJSC The Russian oil and gas company contributed a negative 91 basis points to the fund’s performance. Its share price underperformed with weaker oil and gas prices. We like this company for its strong balance sheet and high dividend yield offered to the holders of the preferred shares.
    • Gazprom PJSC The Russian gas distributor contributed a negative 45 basis points to the fund’s performance. Its share price declined due to weaker sales and lower gas prices. The company is struggling to complete its Nord Stream 2 projects after sanctions were imposed on companies helping Gazprom lay the remaining pipe under the Baltic Sea connecting Russia to Germany. Poland opposes the completion of the project and recently fined Gazprom $7.6 billion.


European markets are still trying to recover from the mid-March correction, but the summer months resulted in more travel and an increase in coronavirus infections. The threat of closing economies remains, but countries are trying to avoid full lockdowns and are only implementing more COVID-19 restrictions in hot spots. Future recovery will very much depend on developing a vaccine and containing the spread of infection. On a positive note, the European Central Bank (ECB) pledged not to remove monetary support until the coronavirus is over.


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. It is not possible to invest in an index.

A basis point is one hundredth of one percent, used chiefly in expressing differences of interest rates. Cash flow is the total amount of money being transferred into an out of business, especially as affecting liquidity.

There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time. The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price.

Holdings may change daily and should not be considered a recommendation to buy or sell any security. Holdings are reported as of the most recent quarter-end. Holdings in the Emerging Europe Fund as a percentage of net assets as of 9/30/2020: BRD-Groupe Societe Generale SA 1.62%, Banca Transilvania SA 1.14%, TCS Group Holding PLC 1.02%, Polyus PJSC 2.94%, Evraz PLC 1.90%, Migros Ticaret AS 0.00%, Sok Marketler Ticaret AS 0.00%, Mlp Saglik Hizmetleri AS 0.00%, LUKOIL PJSC 8.22%, Surgutneftegas PJSC 4.57%, Gazprom PJSC 2.77%.

Net Asset Value
as of 01/15/2021

Global Resources Fund PSPFX $6.26 -0.19 Gold and Precious Metals Fund USERX $12.89 -0.44 World Precious Minerals Fund UNWPX $5.01 -0.18 China Region Fund USCOX $10.49 -0.12 Emerging Europe Fund EUROX $6.36 -0.13 All American Equity Fund GBTFX $24.65 No Change Global Luxury Goods Fund USLUX $20.24 -0.32 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change