Emerging Markets Growth Fund - Quarterly Review March 2020 Portfolio Managers - William Blair Funds
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Emerging Markets Growth Fund
Quarterly Review
March 2020
Todd M. McClone, CFA, Partner
Casey Preyss, CFA, Partner
Portfolio Managers
10047314William Blair Emerging Markets Growth Fund Important Disclosures March 2020
Risks:
The views expressed in this report and the information about the holdings are as of the date of this material, unless otherwise noted, and
are subject to change. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the
Fund will continue to hold any one particular security or stay invested in any one particular sector. Holdings are subject to change at any
time.
The Fund involves a high level of risk and may not be appropriate for everyone. You should only consider it for the aggressive
portion of your portfolio. The Fund’s returns will vary, and you could lose money by investing in the Fund. The Fund holds equities which
may decline in value due to both real and perceived general market, economic, and industry conditions. Investing in foreign denominated
and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be
enhanced in emerging markets. The securities of emerging market companies may be subject to greater volatility and less liquidity than
companies in more developed markets. Individual securities may not perform as expected or a strategy used by the Adviser may fail to
produce its intended result. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a
portfolio. Convertible securities may be called before intended, which may have an adverse effect on investment objectives. The Fund is
expected to incur operating expenses that are higher than those of mutual funds investing exclusively in U.S. equity securities due to the
higher custodial fees associated with foreign securities investments.
Performance cited represents past performance. Past performance does not guarantee future results and current performance
may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of
dividends and capital gains. Investment returns and principal will fluctuate with market and economic conditions and you may
have a gain or loss when you sell shares. For the most current month end performance information, please call 1‐877‐962‐5247,
or visit our Web site at www.williamblairfunds.com. Class N shares are available to the general public without a sales load. Class
I and Class R6 shares are available only to investors who meet certain eligibility requirements.
This content is for informational and educational purposes only and is not intended as investment advice or a recommendation to buy or
sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives,
guidelines and restrictions.
Please carefully consider the Fund’s investment objectives, risks, charges, and expenses before investing. This and other
information is contained in the Fund’s prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272.
Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.
Copyright © 2020 William Blair & Company, L.L.C. “William Blair” is a registered trademark of William Blair & Company, L.L.C.
Distributed by William Blair & Company, L.L.C., member FINRA/SIPC
2 10047314William Blair Emerging Markets Growth Fund Summary & Outlook March 2020
Market Review stimulus measures pledged by the government as a way to
offset the effects of COVID-19 in an already slowing economy.
Global equities plunged and volatility spiked in the first The daily new virus cases in China significantly declined
quarter amid heightened anxieties surrounding the rapid towards the end of the quarter and economic activity
spread of the novel coronavirus (COVID-19) and its impact on modestly improved.
the global economy. The MSCI ACWI IMI ended the quarter
down 22.44% in USD terms. The selloff began at the end of From a global sector perspective, energy sharply declined
February and continued through March as the number of daily (MSCI ACWI IMI Energy -45.31%) as the oil price war
new cases continued to surge globally. Governments urged between Russia and Saudi Arabia intensified. The Airlines
individuals to shelter in place and businesses to shut down in industry also plunged -49.59% as mass flight cancellations
the hopes of curtailing the virus, while also promising massive started to mount. Conversely, more stable and defensive
fiscal stimulus. Major central banks announced various forms sectors such as Healthcare (-12.05%) and Consumer Staples
of quantitative easing in an attempt to maintain financial (-14.33%) outperformed on a relative basis.
system stability. The collapse in oil prices further
compounded investor anxieties following Russia’s decision to Performance
walk away from its informal alliance with Saudi Arabia and
other OPEC countries. The WTI oil price plummeted 67%— Outperformance of the Emerging Markets Growth Fund (Class
the worst quarter on record. N) versus the MSCI Emerging Markets IMI (net) was driven by
a combination of allocation and stock selection effects. An
The longest bull market in US history came to an abrupt halt underweight allocation to Energy, coupled with positive stock
with US equities falling 21.06%, the worst quarterly loss since selection within the Consumer Staples and Industrials sectors
2008. The Federal Reserve issued two emergency rate cuts enhanced relative returns. Within the Consumer Staples
and began aggressively purchasing Treasuries as a means to sector, food products companies Foshan Haitian Flavouring
prevent a liquidity crisis. The government’s fiscal response of and Yihai International Holding boosted relative results.
approximately $2 trillion dollars included checks to Foshan Haitian Flavouring is the largest Chinese soy sauce
supplement individual wages, bailouts for major airlines, and producer. Despite the COVID-19 disruption, the company
aid for small businesses. posted solid results and FY2020 guidance. We believe Haitian
will continue to deliver robust growth and returns given its
Emerging markets equities broadly declined (-24.40% as leadership in the fast-growing and highly-fragmented
measured by the MSCI Emerging Markets IMI) for the quarter seasoning and sauce industry, strong brands, broadening
amid soured investor sentiment towards riskier assets, distribution channels, and solid management. Yihai
plunging commodity prices, and a strengthening US dollar. International is a leading Chinese compound condiment
Latin America suffered the most (-46.30%), driven by manufacturer focused on the hot pot soup flavoring market.
weakness in Brazil and Colombia (-50.82% and -49.77% in US Strong fundamental performance drove the share price
dollar terms). In contrast, China’s performance relative to acceleration during the quarter. The growth outlook remains
global markets was resilient (-10.31%), supported by sizable well underpinned in our view as packaged flavoring and
3 10047314William Blair Emerging Markets Growth Fund Summary & Outlook March 2020
condiments continues to expand from relatively low levels Positioning
and premium seasonings take share from lower-quality
products. Yihai is well positioned to benefit from this trend During the period, Financials exposure was reduced to an
due to its strong, premium brand and expanding distribution underweight position through the liquidations of IRB Brasil
and product portfolio. Resseguros, Banco BTG Pactual and Itau Unibanco Holding.
The latter was sold due to the weaker macro backdrop
Chinese property management services companies Country negatively impacting loan growth and asset quality outlook,
Garden Services and A-Living Services helped relative and the lower interest rate environment hurting margins.
performance in the Industrials sector. Outperformance was Communication Services exposure was increased to an
underpinned by robust growth in the gross floor area under overweight position during the period through the purchases
management and higher revenue from value added services, of Naver, NetEase and Yandex. Naver is the leading South
as the companies benefit from heightened demand for extra Korean search portal with 72% market share. The investment
services and local government subsidies on the back of the thesis is underpinned by the company’s sustained high
Coronavirus outbreak. returns in its core domestic business, enabled by its unique
position in a fragmented e-commerce landscape and
Partially offsetting these effects was the overweight allocation ecosystem effects, coupled with steps taken to rationalize
to Brazil, coupled with negative stock selection within the relatively unsuccessful investments outside of Korea.
Financials sector and the underweight allocation to
Communication Services. Within Financials, Indian financials, NetEase is a leading developer of PC and mobile games to
especially non-bank financial companies, came under internet users in China. The stock strengthened during the
pressure amid increased stress in the financial system. In this quarter on expectations of increased customer engagement
context, Bajaj Finance weighed on relative results on the back resulting from COVID-19. We believe the company’s recent re-
of investor concerns over increased funding costs and focus on core gaming with greater diversifications across
deteriorating asset quality amid economic disruption. genres and geographies, and the reduction in exposure to low-
Brazilian financials also detracted from relative performance. margin business lines will drive improved operating efficiency
Banco BTG Pactual, a leading investment bank and and better profitability.
wealth/asset manager in Brazil and Latin America, weakened
due to deteriorated business sentiment amid COVID-19’s Yandex is Russia’s largest search engine offering diverse
disruption of the economic recovery. IRB Brasil Resseguros, services including taxis and food-delivery. The investment
the dominant reinsurance company in Brazil, fell amid thesis is predicated on continued increase in search market
investor concerns over a short seller report and share allowing the company to fund new growth areas and see
management’s subsequent false assertion of Berkshire improvement in margins from their dominant ride-sharing
Hathaway’s stock ownership, which led to the dismissal of the platform Yandex.taxi. We believe recent share price weakness
company’s CEO and CFO. Both names were sold during the provides an attractive investment opportunity from a
period. valuation standpoint.
4 10047314William Blair Emerging Markets Growth Fund Summary & Outlook March 2020
From a geographic perspective, notable adjustments during economic activity levels are likely to trough between March
the first quarter were the increase to China exposure, offset and May. This means that GDP contraction (i.e. economic
primarily by the decrease to Brazil exposure. recession) is likely to be spread over the first and second
quarters of 2020. Projections for the drop in second quarter
Market Outlook US GDP vary widely, and include the potential for the largest
sequential decline in the history of recorded data.
This commentary has been adapted from our April 2 client
webinar COVID-19 Implications: Navigating the Path Forward. The duration and the durability of lockdowns are key to
gaging the subsequent reopening of the economy, and by
We continue to analyze the global pandemic crisis in multiple extension, the advent of the recovery. Our base case today
contexts including the nature of the virus and the status of our assumes that lockdowns remain in place at least through the
collective health risk, the societal and economic impact, and in end of April. However, if coronavirus testing that is now being
turn, the effects on markets and our portfolios. rolled out on a massive scale proves to be insufficient such
that lockdowns need to be extended, this will delay the
As the virus has spread from China to Europe to the US and recovery and introduce a more bearish element to it.
over 150 countries, we have experienced market volatility
and a downturn unlike any since the Global Financial Crisis, Fiscal stimulus measures announced to date have been
and by some measures since the 1930s. Governments around significant. But the challenges of implementing the stimulus—
the world have begun to wrap their arms around the in terms of channeling it to the right individuals and
magnitude of the contagion and have acted meaningfully to businesses in a timely manner—will result in bankruptcies
suppress the infection curve by effectively shutting down and massively higher unemployment, which is already
massive swaths of the global economy. This has coincided evident. The speed and vigor of the recovery will largely
with unprecedented levels of monetary and fiscal stimulus depend on how quickly the newly unemployed can be
measures to ease the effects on displaced workers and the reabsorbed into the economy and how quickly businesses can
impact to businesses. The stimulus response has been reopen.
particularly strong in developed markets, while emerging
market governments overall may be more limited in their These are key elements to dimensioning the bear, bull and
ability to stimulate. base case scenarios, and they are incredibly fluid. We are
beginning to understand the scale of the unemployment
From an economic impact perspective, we are expecting a problem, but we do not yet have any clarity on the extent of
very deep recession to be met with continued strong policy potential bankruptcies. Beyond unemployment and
responses, supporting a steep sequential recovery later this bankruptcies, we continue to closely track high-frequency
year. While the recovery will likely be strong, we acknowledge survey indicators—including purchasing managers’ indices
it could take 8 to 10 quarters before growth normalizes to and their subcomponents—to help assess the magnitude of
pre-crisis levels. corporate order book deterioration, supply chain challenges
and pricing pressures. All of these questions are elucidated on
For China, the full brunt of the economic decline is likely to be a monthly basis through the survey data.
borne in the first quarter of 2020, while Europe and US
5 10047314William Blair Emerging Markets Growth Fund Summary & Outlook March 2020
select financials where share prices may be discounting overly
We have remained steadfastly focused on seeking bearish revenue and profit scenarios.
opportunities to add to our best ideas in this tumultuous
environment, looking beyond transitory virus-related From a geographic perspective, we came into 2020 expecting
business effects. In particular, we are interested in quality that improving relative growth rates of non-US economies
growth companies that have been out of our reach purely would help non-US developed and emerging markets equities
from a valuation perspective, as well as high-quality cyclicals begin to narrow the performance gap versus the US. The
that have witnessed significant declines but have the pandemic-induced recession has abruptly altered this outlook,
wherewithal to navigate the crisis. with the US economy, bolstered by its technology sector
leadership, now likely better positioned to endure the
In order to mitigate risk, we are paying special attention to significant near-term growth headwinds.
two specific concerns. The first are portfolio companies that
may have previously benefitted from the steady, albeit low Looking beyond the US, China’s performance has been
growth outlook. These are now more at risk of being exposed impressively resilient. This has been supported initially by
for being less in control of their own destiny than we sizable government stimulus measures to offset the
previously thought. The second area, and its related area of detrimental effects of the virus, and more recently by the
research, are the companies in our portfolios with more downward trend in daily new virus cases that has led to a
fragile balance sheets and increased solvency risk resulting gradual reopening of the economy.
from pandemic-related cash flow pressures. We likely have
few of these risks, but in those few instances the outcomes Interestingly, many of the aforementioned structural growth
could be severe. themes are flourishing in China as the government prioritizes
investment in higher value added, technology-enabled areas.
It has been encouraging for us to see the market differentiate Our research process continues to uncover attractive Chinese
those companies that are tied to more structurally advantaged companies that not only have attractive growth rates, but high
themes amid the downturn. Technology-enabled growth areas quality attributes in terms of financial performance and
like distributed computing, 5G telecom, ecommerce, online innovation, which we think are underappreciated by many
education and telemedicine have outperformed more investors.
traditional, “old economy” industries, regardless of valuation
differentials favoring the latter. Our conviction in portfolio More broadly across Asia, we are attracted to the relative
companies tied to these growth areas is actually increasing in stability of markets like South Korea and Taiwan, where new
this environment, as their competitive positions are likely to virus cases have already peaked and economies are more
strengthen amid the downturn. resilient, supported by relatively strong fiscal positions, stable
currencies and prominent technology sectors that have
At the same time, we are being diligent in reassessing become increasingly integral to global supply chains.
cyclically-oriented companies within our quality growth
universe that have been heavily penalized in recent weeks. In recent weeks we have been diligent in speaking with as
These include automotive and travel-related companies, and many portfolio companies as we can: in March alone we had
6 10047314William Blair Emerging Markets Growth Fund Summary & Outlook March 2020
over 125 corporate touchpoints. We wish we were getting
more reassurances on demand and client activity from The collaborative, engaged nature of our investment process
management teams, but we recognize that their visibility has prepared us remarkably well for this more decentralized,
remains extremely limited given uncertainties surrounding virtual form of work and connectedness. The content of our
the pandemic. research has never been richer. And the engagement and the
commitment of the team have never been stronger. We are
What we are learning from them, however, is their collaborating on the development of new tools and
preparedness and their ability to navigate through the crisis frameworks to help us collectively assess the impact of the
in terms of protecting client relationships, effective resource virus on the economy as well as industry and company
management, and execution around their strategy. As in all growth rates. This exercise is not just a triage for the current
crises, the best will not only survive, but will actually emerge crisis, but an opportunity for deeper, reflective work on its
stronger, with improved competitive positioning and more longer-term growth implications. This has provided cohesion
enduring growth prospects. This is where we are continuing and consistency to our process.
to focus.
It’s actually been very rich and rewarding work in these trying
Over the last several weeks we have received many inquiries times. In fact, I would describe our work culture as not one of
about the state of our firm, our investment team, and our panic, but one of tremendous productivity.
investment process. I must say that I’ve been inspired, but not
surprised, by the energy and the commitment of our Ken McAtamney, Partner
investment professionals and all team members in this very Head of Global Equity Team
challenging time.
7 10047314Market Performance March 2020
QTD 2019 2018 2017
AC World (DM+EM) -22.4 26.4 -10.1 23.9
Developed Markets (DM) -22.2 27.5 -9.4 22.4
Japan -17.4 19.6 -13.5 25.3
Europe ex UK -23.3 25.0 -15.7 28.0
UK -30.0 23.2 -15.0 23.7
USA -21.1 30.4 -5.7 20.6
Emerging Markets (EM) -24.4 17.6 -15.0 36.8
Asia -18.9 17.8 -15.9 41.8
Regions
China -10.3 22.7 -18.7 50.7
India -31.8 5.3 -11.2 43.7
Korea -22.5 9.6 -20.6 46.0
Taiwan -19.6 35.2 -10.1 30.2
EMEA -34.1 15.8 -16.8 24.1
Russia -36.2 50.1 -1.4 5.1
South Africa -41.6 11.2 -24.7 34.0
Latin America -46.3 19.4 -7.2 24.8
Brazil -50.8 29.3 -1.1 26.4
Mexico -36.1 12.9 -15.1 15.0
Frontier Markets (FM) -26.1 13.8 -16.6 29.9
Large Cap -22.4 19.3 -14.9 37.7
Size
Small Cap -31.4 11.5 -18.6 33.8
Communication Svcs -10.3 10.9 -15.3 16.8
Discretionary -20.3 31.6 -29.3 38.6
Staples -20.3 9.6 -14.2 25.0
Energy -39.9 19.4 3.6 21.0
Financials -31.4 12.0 -9.2 32.7
Sectors
Healthcare -9.8 2.9 -19.8 35.4
Industrials -30.1 6.3 -15.1 25.7
IT -18.5 40.8 -19.6 59.9
Materials -30.8 7.7 -13.4 33.5
Real Estate -28.8 22.2 -16.0 42.2
Utilities -27.4 9.7 -5.8 17.5
Quality 5.6 13.7 16.6 2.4
Valuation -14.9 4.5 15.0 0.1
Etrend 8.9 12.5 8.8 14.4
Style
Momentum 10.7 16.1 -0.1 18.3
Growth 13.5 6.1 -7.4 9.5
Composite -0.6 16.8 19.9 7.9
Past performance is not a reliable indicator of future results. Regional performance is based on IMI region/country indexes. Sector and style values are based
on the MSCI EM IMI Index. Size values are based on the MSCI EM IMI Index. Style values reflect the Quintile 1 minus Quintile 5 spread of William Blair’s proprietary
quantitative models. Sectors are based on Global Industry Classification (GICS) sectors. Large Cap and Small Cap based on MSCI Global Investable Market Index
Methodology. Data in blue reflects the top 20% (highest) values by region, country, sector, and style. Data in red reflects the bottom 20% (lowest) values by region,
country, sector, and style. All index returns are net of dividends. A direct investment in an unmanaged index is not possible. Name change from Telecommunication
Services to Communication Services effective after close of business on 9/28/18; industry and subindustry reclassifications effective 10/1/18.
8 10047314William Blair Emerging Markets Growth Fund Performance March 2020
Periods ended 3/31/2020 March Quarter 1 Year 3 Year 5 Year 10 Year
William Blair Emerging Markets Growth -16.77% -20.85% -9.42% 1.41% -0.21% 2.55%
Fund (WBENX) – Class N
William Blair Emerging Markets Growth -16.74% -20.84% -9.18% 1.65% 0.04% 2.81%
Fund (WBEIX) – Class I
William Blair Emerging Markets Growth -16.74% -20.80% -9.13% 1.75% 0.12% 2.95%
Fund (BIEMX) – Institutional Class R6
MSCI Emerging Markets IMI (net) -16.19% -24.40% -18.91% -2.53% -0.90% 0.47%
Inception 6/6/2005
Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or
higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment
returns and principal will fluctuate with market and economic conditions and you may have a gain or loss when you sell shares. For the most
current month end performance information, please call 1‐877‐962‐5247, or visit our Web site at www.williamblairfunds.com. Class N shares
are available to the general public without a sales load. Class I and Class R6 shares are available only to investors who meet certain eligibility
requirements.
Emerging Markets Growth Fund Expense Ratios:
Gross
Class N Shares 1.52%
Class I Shares 1.27%
Class R6 Shares 1.19%
Expenses shown are as of the most recent prospectus.
A direct investment in an index is not possible. The MSCI Emerging Markets IMI Index is a free float-adjusted market capitalization index that is designed to
measure equity market performance in the global emerging markets
.
9 10047314William Blair Emerging Markets Growth Fund Performance Analysis (by sector) March 2020
The table below shows the calculated sector attribution of the Emerging Markets Growth Fund vs. its benchmark.
Emerging Markets Growth Fund vs. MSCI Emerging Markets IMI (net)
01/01/2020 to 03/31/2020
Emerging Markets Growth Fund MSCI Emerging Markets IMI (net) Attribution Analysis
Issue
Average Total Contrib to Average Total Contrib to Allocation Selection Total
GICS Sector Weight Return Return Weight Return Return Effect Effect Effect
Communication Services 6.2% -6.6% -0.2% 11.0% -10.3% -1.1% -0.7% 0.2% -0.5%
Consumer Discretionary 18.7% -18.7% -3.7% 14.6% -20.3% -2.9% 0.2% 0.3% 0.5%
Consumer Staples 7.3% -6.8% -0.5% 6.4% -20.3% -1.3% 0.1% 0.9% 1.0%
Energy 2.3% -31.0% -0.9% 6.3% -39.9% -2.8% 0.7% 0.2% 0.9%
Financials 23.7% -37.7% -8.7% 21.8% -31.4% -7.1% 0.0% -1.3% -1.2%
Health Care 6.0% -3.4% -0.4% 3.7% -9.8% -0.3% 0.4% 0.3% 0.7%
Industrials 5.5% -15.2% -0.9% 6.0% -30.1% -1.9% 0.0% 0.8% 0.9%
Information Technology 26.5% -18.1% -4.9% 16.4% -18.5% -2.9% 0.6% 0.0% 0.7%
Materials 1.1% -14.2% -0.2% 7.5% -30.8% -2.4% 0.4% 0.2% 0.6%
Real Estate 0.4% -27.5% -0.1% 3.5% -28.8% -1.0% 0.1% 0.0% 0.1%
Utilities 0.5% -14.3% 0.0% 2.8% -27.4% -0.8% 0.1% 0.1% 0.1%
Cash 1.8% - -0.1% 0.0% 0.0% 0.0% 0.3% 0.0% 0.3%
Total 100.0% -20.5% -20.5% 100.0% -24.4% -24.4% 2.3% 1.7% 4.0%
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period,
including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent
simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary
attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. Sectors are
based on Global Industry Classification (GICS) Sectors. International investing involves special risk considerations, including currency fluctuations, lower liquidity,
economic and political risk.
10 10047314William Blair Emerging Markets Growth Fund Performance Analysis (by region) March 2020
The table below shows the calculated regional attribution of the Emerging Markets Growth Fund vs. its benchmark.
Emerging Markets Growth Fund vs. MSCI Emerging Markets IMI (net)
01/01/2020 to 03/31/2020
Emerging Markets Growth Fund MSCI Emerging Markets IMI (net) Attribution Analysis
Issue
Average Total Contrib to Average Total Contrib to Allocation Selection Total
Region Weight Return Return Weight Return Return Effect Effect Effect
EM Asia 76.7% -15.0% -11.5% 75.0% -18.9% -13.8% 0.2% 2.7% 2.9%
EMEA 6.1% -30.4% -1.9% 14.1% -34.1% -5.1% 0.9% 0.3% 1.1%
Latin America 15.3% -45.5% -7.0% 10.8% -46.3% -5.5% -0.9% 0.5% -0.3%
Cash 1.8% - -0.1% 0.0% 0.0% 0.0% 0.3% 0.0% 0.3%
Total 100.0% -20.5% -20.5% 100.0% -24.4% -24.4% 0.4% 3.5% 4.0%
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period,
including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent
simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary
attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. International
investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.
11 10047314William Blair Emerging Markets Growth Fund Top Contributors/Detractors March 2020
The tables below show the top contributors and detractors for the Emerging Markets Growth Fund vs. its benchmark.
Top Five Contributors (%) for the Period: 01/01/2020 to 03/31/2020
Issuer Sector Country Contribution To
Relative Return
Shenzhen Mindray Bio-Medical E Health Care China 0.38
Country Garden Services Holdin Industrials China 0.26
Alibaba Group Holding Ltd Consumer Discretionary China 0.25
A-Living Services Co Ltd Industrials China 0.22
Taiwan Semiconductor Manufactu Information Technology Taiwan 0.22
Top Five Detractors (%) for the Period: 01/01/2020 to 03/31/2020
Issuer Sector Country Contribution To
Relative Return
Tencent Holdings Ltd Communication Services China -0.52
Bajaj Finance Ltd Financials India -0.46
Banco BTG Pactual SA Financials Brazil -0.38
HDFC Bank Ltd Financials India -0.31
Lojas Renner SA Consumer Discretionary Brazil -0.28
Index: MSCI Emerging Markets IMI (net)
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Performance results will be reduced by the fees incurred. Attribution by is based on estimated returns of all equities held during a measurement
period, including purchases and sales. We calculate attribution using our proprietary attribution system. Our proprietary attribution system runs transactions-
based attribution, taking into account all trading activity. Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report
are for informational purposes only. Holdings are subject to change at any time. This information does not constitute, and should not be construed as, investment
advice or recommendations with respect to the securities listed. Specific securities identified and described do not represent all of the securities purchased, sold, or
recommended and you should not assume that investments in the securities identified were or will be profitable.
12 10047314William Blair Emerging Markets Growth Fund Positioning March 2020
Regional Exposure Sectoral Exposure
82.3 Communication Services 12.8 8.0
EM Asia Total 8.2 12.2
78.7
42.7 Consumer Discretionary 18.4 0.2
China 12.0 15.2
38.1
8.4 0.2
9.8 Consumer Staples
India -3.7 6.6
8.2
Energy 1.3 -1.2
8.6 5.5
South Korea 1.2
12.4
Financials 13.6 -13.6
18.5 20.4
Taiwan 1.1
13.3 6.9
Health Care 2.3
5.5 4.3
EMEA Total -1.2
12.9 4.9
Industrials -0.6
0.8 5.7
Russia 0.5
3.1 Information Technology 27.1 2.0
17.0
2.3
South Africa 0.2 1.2
3.6 Materials 0.4
7.1
7.3
Latin America Total -10.1 --
8.4 Real Estate -0.6
3.4
4.9 0.3
Brazil -9.4 Utilities -0.1
5.1 2.7
0.5 --
Mexico -0.2 Other 0.0
2.0 0.0
4.9 4.9 3.2
Cash & Equivalents 3.2 Cash & Equivalents
-- --
William Blair Emerging Markets Growth Fund
William Blair Emerging Markets Growth Fund
Portfolio Diff Previous QTR Portfolio Diff Previous QTR
MSCI Emerging Markets IMI (net) MSCI Emerging Markets IMI (net)
Source: William Blair.
Cash & Equivalents includes: cash and dividend accruals.
13 10047314William Blair Emerging Markets Growth Fund Top Holdings by Market Cap March 2020
The table below shows the Emerging Markets Growth Fund’s largest holdings as of 3/31/2020 by market cap as well as the sub-totals by
market cap for the portfolio and index. The stocks are listed by country and by the sector that defines each one’s role in the portfolio.
% of Total % of Total
Net Assets in Net Assets in
Country Sector Portfolio Index*
Large Cap(>$15b) 50.6% 40.6%
Alibaba Group Holding Ltd China Consumer Discretionary 8.4% 6.4%
Taiwan Semiconductor Taiwan Information Technology 7.7% 4.2%
Manufactu
Tencent Holdings Ltd China Communication Services 6.7% 5.3%
Samsung Electronics Co Ltd South Korea Information Technology 4.9% 4.1%
NetEase Inc China Communication Services 1.9% 0.4%
Mid Cap($4-15b) 22.7% 26.2%
MediaTek Inc Taiwan Information Technology 2.1% 0.3%
B3 SA - Brasil Bolsa Balcao Brazil Financials 1.5% 0.3%
E.Sun Financial Holding Co Ltd Taiwan Financials 1.3% 0.2%
Shenzhen Mindray Bio- China Health Care 1.2% 0.0%
Medical E
Kakao Corp South Korea Communication Services 1.2% 0.1%
Small Cap(William Blair Emerging Markets Growth Fund Top Portfolio Changes March 2020
Top Portfolio Changes During the Period: 01/01/2020 to 03/31/2020
Security Name Country Sector
Netease Inc-Adr China Communication Services
Purchases
Meituan Dianping-Class B China Consumer Discretionary
New
Naver Corp South Korea Communication Services
Yandex Nv-A Russian Federation Communication Services
Sk Hynix Inc South Korea Information Technology
Itau Unibanco Holding S-Pref Brazil Financials
Liquidations
Irb Brasil Resseguros Sa Brazil Financials
Anta Sports Products Ltd China Consumer Discretionary
Chailease Holding Co Ltd Taiwan Financials
Shenzhou International Group China Consumer Discretionary
Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report are for informational purposes only. Holdings are subject
to change at any time. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities
listed. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended and you should not assume that investments
in the securities identified were or will be profitable.
15 10047314William Blair Emerging Markets Growth Fund Characteristics March 2020
MSCI Emerging Markets IMI
Emerging Markets Growth Fund (net) Difference
Quality
Return on Equity (%) 19.6 15.6 26%
Cash Flow ROIC (%) 20.6 16.3 26%
Debt/Equity (%) 41.5 78.5 -47%
Growth
Long-Term Growth (%) 19.4 13.7 42%
5-Year Historic EPS Growth (%) 19.9 14.4 38%
Reinvestment Rate (%) 13.6 10.6 28%
Earnings Trend
EPS Revision Breadth (%) -17.9 -20.8 2.8
Valuation
P/E (next 12 months) 19.9 10.7 85%
Other
Float Adjusted Weighted Average Market Cap ($m) 75,280 57,752 30%
Number of Holdings 118 3,053
Active Share (%) 67 --
The index is comparable to the strategy in terms of investment approach but contains significantly more securities. Calculated in FactSet, with the exception of
market cap and active share, which are calculated in Eagle.
From a portfolio perspective, the portfolio P/E ratio and EPS Growth Rate are weighted averages of the individual holdings’ P/E ratios and EPS Growth Rates.
16 10047314William Blair Emerging Markets Growth Fund Holdings March 2020
Portfolio Portfolio Portfolio
Weight Weight Weight
EM Asia 82.32 EM Asia (continued) EM Asia (continued)
China 42.71 China (continued) India (continued)
Alibaba Group Holding-Sp Adr 8.00 Aier Eye Hospital Group Co-A 0.51 Info Edge India Ltd 0.32
Tencent Holdings Ltd 6.41 Shennan Circuits Co Ltd-A 0.50 Dabur India Ltd 0.31
Netease Inc-Adr 1.80 Zhangzhou Pientzehuang Pha-A 0.50 Crompton Greaves Consumer El 0.22
Ping An Insurance Group Co-H 1.73 Ping An Healthcare And Techn 0.49 Varun Beverages Ltd 0.20
Shenzhen Mindray Bio-Medic-A 1.18 Chacha Food Co Ltd-A 0.49 Srf Ltd 0.19
Meituan Dianping-Class B 1.04 Topsports International Hold 0.47 Indonesia 1.87
Country Garden Services Hold 1.03 Midea Group Co Ltd-A 0.47 Bank Central Asia Tbk Pt 1.48
Wuxi Biologics Cayman Inc 1.02 Topchoice Medical Corporat-A 0.40 Bank Rakyat Indonesia Perser 0.39
China Merchants Bank-H 1.01 Jiajiayue Group Co Ltd-A 0.33 South Korea 8.65
Luxshare Precision Industr-A 0.92 China International Travel-A 0.32 Samsung Electronics Co Ltd 4.66
Wuliangye Yibin Co Ltd-A 0.90 Yifeng Pharmacy Chain Co L-A 0.32 Kakao Corp 1.15
Foshan Haitian Flavouring -A 0.89 Shandong Weigao Gp Medical-H 0.31 Naver Corp 0.93
New Oriental Educatio-Sp Adr 0.81 Chengdu Hongqi Chain Co Lt-A 0.31 Sk Hynix Inc 0.83
Silergy Corp 0.79 Naura Technology Group Co-A 0.28 Lg Household & Health Care 0.52
Jiangsu Hengrui Medicine C-A 0.76 Shanghai M&G Stationery In-A 0.27 Macquarie Korea Infra Fund 0.36
Li Ning Co Ltd 0.74 India 9.81 Rfhic Corp 0.20
Sunny Optical Tech 0.74 Hdfc Bank Limited 1.52 Taiwan 18.49
Tal Education Group- Adr 0.73 Reliance Industries Ltd 1.32 Taiwan Semiconductor-Sp Adr 4.99
Wuxi Apptec Co Ltd-H 0.72 Housing Development Finance 1.02 Taiwan Semiconductor Manufac 2.30
Gsx Techedu Inc- Adr 0.70 Bajaj Finance Ltd 0.72 Mediatek Inc 1.97
Yihai International Holding 0.67 Hindustan Unilever Ltd 0.70 E.Sun Financial Holding Co 1.26
A-Living Services Co Ltd-H 0.63 Nestle India Ltd 0.70 Win Semiconductors Corp 0.98
Jiangsu Hengli Hydraulic C-A 0.62 Asian Paints Ltd 0.62 Aspeed Technology Inc 0.62
Kweichow Moutai Co Ltd-A 0.62 Tata Consultancy Svcs Ltd 0.50 Powertech Technology Inc 0.50
Offcn Education Technology-A 0.60 Pidilite Industries Ltd 0.42 Globalwafers Co Ltd 0.47
Centre Testing Intl Group-A 0.60 Hdfc Life Insurance Co Ltd 0.37 Wiwynn Corp 0.46
Alibaba Health Information T 0.53 Hdfc Asset Management Co Ltd 0.35 Parade Technologies Ltd 0.42
Hangzhou Tigermed Consulti-A 0.52 Indraprastha Gas Ltd 0.34 Asmedia Technology Inc 0.42
As of 3/31/2020. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one
particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.
17 10047314William Blair Emerging Markets Growth Fund Holdings March 2020
Portfolio Portfolio
Weight Weight
EM Asia (continued) EMEA (continued)
Taiwan (continued) Russia 0.76
Accton Technology Corp 0.39 Yandex Nv-A 0.76
Nanya Technology Corp 0.38 South Africa 2.28
Airtac International Group 0.38 Naspers Ltd-N Shs 1.47
Voltronic Power Technology 0.37 Clicks Group Ltd 0.51
Taiwan Union Technology Corp 0.37 Capitec Bank Holdings Ltd 0.30
Tripod Technology Corp 0.35 Latin America 7.30
Elite Material Co Ltd 0.35 Argentina 1.72
Advantech Co Ltd 0.34 Mercadolibre Inc 1.32
King Yuan Electronics Co Ltd 0.32 Globant SA 0.40
Iteq Corp 0.31 Brazil 4.87
Sinbon Electronics Co Ltd 0.28 B3 Sa-Brasil Bolsa Balcao 1.39
Lotes Co Ltd 0.26 Weg SA 0.76
Thailand 0.79 Magazine Luiza SA 0.53
Sea Ltd-Adr 0.79 Xp Inc - Class A 0.45
EMEA 5.45 Lojas Renner S.A. 0.44
Czech Republic 0.24 Stoneco Ltd-A 0.43
Moneta Money Bank As 0.24 Totvs SA 0.36
Greece 0.25 Localiza Rent A Car 0.27
Jumbo SA 0.25 Arco Platform Ltd - Class A 0.25
Hungary 0.60 Mexico 0.55
Otp Bank PLC 0.60 Walmart De Mexico Sab De Cv 0.55
Kenya 0.35 Peru 0.15
Safaricom PLC 0.35 Intercorp Financial Services 0.15
Poland 0.73 Cash 4.94
Dino Polska SA 0.43 Total 100.00
Cd Projekt SA 0.30
Romania 0.26
Banca Transilvania SA 0.26
As of 3/31/2020. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one
particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.
18 10047314Glossary - Terms
1 Month EPS Revision Breadth: 1-month factor representing the trend in the direction of estimate changes. Range from -100% to +100%, it is calculated as
the number of positive revisions minus the number of negative revisions divided by the total number of estimates.
Active Share: A measure of the percentage of equity holdings in a portfolio that differ from the benchmark index. It is calculated by taking the sum of the
absolute value of the differences of the weight of each holding in a portfolio versus the weight of each holding in the index and dividing by two.
Alpha: A measure of a portfolio’s return in excess of the market return, after both have been adjusted for risk. It is a mathematical estimate of the amount of
return expected from a portfolio above and beyond the market return at any point in time. For example, an alpha of 1.25 indicates that a stock is projected to
rise 1.25% in price in a year over the return of the market, or the return when the market return is zero. When an investment price is low relative to its alpha, it
is undervalued, and considered a good selection.
Beta: A quantitative measure of the volatility of the portfolio relative to the overall market, represented by a comparable benchmark. A beta above 1 is more
volatile than the overall market, while a beta below 1 is less volatile, and could be expected to rise and fall more slowly than the market.
Cash Flow Return on Invested Capital (ROIC): A measure of how effectively a company generates cash flow based on legacy capital investment.
Developed Markets: Using the Morgan Stanley Capital International (MSCI) geographic definition, this region includes: United Kingdom, Europe (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Spain, Sweden and Switzerland), Japan, Pacific Asia (Australia, Hong
Kong, New Zealand, and Singapore) and the Western Hemisphere (Canada and other Americas).
Debt to Total Capital Ratio: This figure is the percentage of each company’s invested capital that consists of debt. Companies with a high Debt to Total Capital
level may be considered more risky. From a portfolio perspective, the portfolio Debt to Total Capital Ratio is a weighted average of the individual holdings' Debt
to Total Capital Ratio.
Emerging Markets: Using MSCI’s geographic definition, this region includes: Emerging Markets Asia (China, India, Indonesia, Malaysia, S Korea, Taiwan, and
Thailand), Emerging Markets Europe, Mid-East and Africa (Czech Republic, Hungary, Poland, Russia, Turkey, Egypt, Morocco, and S Africa), and Latin America
(Argentina, Brazil, Chile, Columbia, Mexico, Peru and Venezuela).
EPS (Earnings Per Share) Growth Rate (Projected): This measure represents the weighted average of forecasted growth in earnings expected to be
experienced by the stocks within the portfolio over the next 3-5 years. From a portfolio perspective, the portfolio P/E ratio and EPS Growth Rate are weighted
averages of the individual holdings’ P/E ratios and EPS Growth Rates. Data calculated in FactSet.
EPS Growth Rate - 5-Year Historic: The weighted average earnings per share growth for stock within the portfolio over the past 5 years.
EV/EBITDA: (Enterprise Value / Earnings Before Interest, Taxes and Depreciation-Amortization): The EV/EBITDA ratio is useful for global comparisons
because it ignores the distorting effects of individual countries' taxation policies. It's used to find attractive takeover candidates. Enterprise value is a better
measure than market cap for takeovers because it takes into account the debt which the acquirer will have to assume. Therefore, a company with a low
EV/EBITDA ratio can be viewed as a good takeover candidate.
EV/IC: (Enterprise Value / Invested Capital) Ratio: Enterprise Value (EV), which is market capitalization minus cash plus debt divided by Invested Capital
(IC), which is the sum of common stock, preferred stock and long-term debt. This number will get you a simple multiple. If it is below 1.0, then it means that the
company is selling below book value and theoretically below its liquidation value.
19 10047314Glossary - Terms
Information Coefficient: A measure of the correlation between expected and actual returns.
Information Ratio: A measure of risk-adjusted return. The annualized excess return of the portfolio relative to a respective benchmark, divided by the
annualized tracking error relative to that same benchmark. The higher the measure, the higher the risk-adjusted return.
PBV: (Price/Book Value) Ratio: The PBV Ratio measures the value of a company's common stock relative to its shareholder's equity. A price-to-book multiple
above one means that the price of the company's common stock is higher than its common shareholder's equity. A price-to-book multiple below one means that
the price of the company's common stock are less than its break-up value, and the shares may be undervalued.
PCF: (Price/CashFlow): Some analysts favor the price/cash flow over the price-earnings (PE) ratio as a measure of a company’s value. Cash flow is a measure
of a company's financial health. It equals cash receipts minus cash payments over a given period of time.
P/E: (Price/Earnings) Ratio: This is the most common measure of how expensive a stock is. Simply, it is the cost an investor in a given stock must pay per
dollar of current annual earnings. A high P/E generally indicates that the market is paying more to obtain the stock because it has confidence in the company’s
ability to increase its earnings. Conversely, a low P/E often indicates that the market has less confidence that the company’s earnings will increase rapidly or
steadily, and therefore will not pay as much for its stock.
R-squared: A measurement of how closely the portfolio’s performance correlates with the performance of its benchmark, such as the MSC AC World Free ex US
Index. In other words, it is a measurement of what portion of a portfolio’s performance can be explained by the performance of the overall market or index.
Ranges from 0 to 1, where 0 indicates no correlation and 1 indicates perfect correlation.
Risk (Standard Deviation): A measure of the portfolio’s risk. A higher standard deviation represents a greater dispersion of returns, and thus a greater
amount of risk. The annualized standard deviation is calculated using monthly returns.
Sharpe-Ratio: A risk-adjusted measure calculated using standard deviation and excess return (Portfolio return – Risk Free Rate) to determine reward per unit
of risk. The higher the Sharpe ratio, the better the portfolio’s historic risk-adjusted performance.
Tracking Error: Tracking Error measures the extent to which a portfolio tracks its benchmark. The tracking error of an index portfolio should be lower than
that of an active portfolio. The tracking error will always be greater than zero if the portfolio is anything other than a replication of the benchmark.
Trailing 1-Year Turnover: This figure reflects the portfolio’s trading activity by calculating the amount of the portfolio’s holdings bought or sold over the prior
year, expressed as a percentage of the portfolio’s average market value. Turnover figures may be related to the amount of trading costs experienced by the
portfolio.
Weighted Average Market Capitalization: Market capitalization refers to the total market value of each company's outstanding shares. The Weighted
Average Market Capitalization for a portfolio is calculated as the average market capitalization of the stocks within the portfolio, weighted by the amount of each
stock owned.
Weighted Median Market Capitalization: This calculation represents the median market capitalization of the stocks in the portfolio, weighted by the amount
of each stock owned.
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