THE FUND:

The fund rose 3.2% in March, compared with MSCI FMxGCC Net TR (SEK), rising 1.7% and MSCI EM Net TR (SEK), falling 1%. During March, it was primarily our Egyptian positions that contributed to the Fund’s excess return. Elsewedy, a leading industrial company engaged in providing complete solutions for the power industry, increased by 40%. The fund also received a positive contribution from Pakistan, which underwent a further devaluation of the currency of about 5% (a total of almost 10% since December), helping the market to continue upward. In December, the fund took positions in two leading industrial conglomerates, Lucky Cement and DG Khan Cement. Both increased nearly 10% during the month. The fund’s lack of Argentinean holdings (Argentina is 27% in MSCI FMxGCC Net TR) also contributed positively as Argentina fell less than 2% during the month. Kenya contributed negatively. At present, the fund does not hold any positions in Kenya because, in our view, there is an inefficient balance between risks and upside potential. Kenya rose 11% during the month. The fund’s absence in the largest index shares in Vietnam also gave a negative contribution as the index shares continued to rise sharply in March. In short, we note that in the first quarter of 2018, we had an unusually good start as the fund increased 13.1% compared with MSCI FMxGCC Net TR (SEK), which increased 6.8% in the same period and MSCI EM Net TR (SEK) saw a rise of 3.4%. In particular, our positions in Egypt and Pakistan have contributed to these gains, along with our choice to remain out of Argentina’s market.

MARKET:

MSCI FMxGCC Net TR (SEK) rose 1.7% over the month, compared to MSCI EM Net TR (SEK), which fell 1%. In the larger markets, Kenya (+11%) and Vietnam (+ 5%) were the strongest, while Argentina (-2%) and Nigeria (-4%) were the losers of the month. In Kenya, foreign investors responded positively to the détente between President Kenyatta and Odinga (the primary opponent in the presidential election). In Vietnam, 4-5 largest index shares rose sharply on continued foreign inflows. In Argentina, consolidation continued after a sharp upswing last year. Profit retrenchments have characterised the Nigerian market after the sharp upswing, especially in the fourth quarter of 2017. Looking ahead, we anticipate positive conditions for the remainder of the year. High valuations in developed markets combined with rising interest rates mean that investors are looking for markets with higher growth. We believe that there are good conditions for a continued declining valuation gap between developed and other equity markets. Having said that, we also think that from here on stock selection will become increasingly important. Based on our assessment the largest companies in the frontier index are, in many cases, overvalued. Therefore, the conditions for active management are unusually good for the rest of the year.

ESG ENGAGEMENT:

IFAD Autos Ltd., a Bangladeshi company that imports and sells a range of commercial vehicles through a dealership with Ashok Leyland, an Indian automobile manufacturer, was added to the fund in March 2018. Founded in 1985, the company is based in Dhaka. Under its sustainability initiatives, the company e.g. promotes public awareness of autism among children. A detailed analysis of IFAD Autos’ ESG aspects will be conducted during the second quarter.

Four companies were divested during this month (Military Commercial Joint Stock Bank, Pak Elektron Ltd., Aisha Steel Mills Ltd. and Century Paper & Board Mills) due to financial considerations.

DISCLAIMER:
Capital invested in a fund may either increase or decrease in value and it is not certain that you be able to recover all of your investment. Historical return is no guarantee of future return. The state of the origin of the Fund is Sweden. This document may only be distributed in or from Switzerland to qualified investors within the meaning of Art. 10 Para. 3,3bis and 3ter CISA. The representative in Switzerland is ACOLIN Fund Service AG, Affolternstrasse 56, CH-8050 Zurich, whilst the Paying Agent is Bank Vontobel Ltd, Gotthardstrasse 43, CH-8002 Zurich. The Basic documents of the fund as well as the annual report may be obtained free of charge at the registered office of the Swiss Representative.