Frontier Emerging Markets Review | First Quarter 2021 April 20, 2021 - Fundamental. Thinking. Worldwide.
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Fundamental. Thinking. Worldwide. Frontier Emerging Markets Review | First Quarter 2021 April 20, 2021
Composite Performance
As of March 31, 2021
Performance (% Total Return)
Since
3 Months 1 Year 3 Years1 5 Years1 10 Years1
Inception1,2
HL Frontier Emerging Markets Equity (gross) -1.80 47.30 -2.56 5.35 3.79 1.32
HL Frontier Emerging Markets Equity (net) -2.13 45.33 -3.88 3.91 2.32 -0.09
MSCI Frontier Emerging Markets Index3,4 -5.99 33.99 -3.99 2.77 1.78 -1.53
Up/Down Capture (Trailing Five Years, Annualized): 98/87
1Annualized Returns; 2Inception date May 31, 2008; 3The Benchmark Index; 4Gross of withholding taxes.
Composite performance shown is preliminary. For comparison purposes the Composite return is measured against the MSCI Frontier Emerging Markets Total Return Index (Gross). Harding
Loevner LP is an investment adviser registered with the Securities and Exchange Commission. Harding Loevner claims compliance with the Global Investment Performance Standards (GIPS®).
Harding Loevner has been independently verified for the period November 1, 1989 through December 31, 2020. A firm that claims compliance with the GIPS standards must establish policies
and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm's policies and procedures related to composite
and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been
implemented on a firm-wide basis. The verification reports are available upon request. Verification does not ensure the accuracy of any composite presentation. Performance data quoted
represents past performance; past performance does not guarantee future results. Returns are presented both gross and net of management fees and include the reinvestment of all income.
Net returns are calculated using actual fees. The US dollar is the currency used to express performance. For complete information on the construction and historical record of the Frontier
Emerging Markets Composite, please contact Harding Loevner at (908) 218-7900 or visit www.hardingloevner.com. The firm maintains a complete list of composite descriptions, a list of
limited distribution pooled fund descriptions, and a list of broad distribution pooled funds, which are available upon request. Please read the disclosures on the last page, which are an integral
part of this presentation.
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. HARDING LOEVNER 2Quality & Growth Investment Philosophy
As of March 31, 2021
More Profitable Lower Risk Faster Growth
Cash Flow
Profit Margin Return on Assets Return on Equity Std Dev of ROE Debt/Equity Sales Growth Earnings Growth Growth
91.7
16.2
14.9
14.3
13.3
10.1 50.5
9.4
7.0
4.8
3.6 3.6 3.4 3.4 4.0
1.2
Harding Loevner Frontier Emerging Markets Equity Model MSCI Frontier Emerging Markets Index
Source: FactSet, MSCI Inc.; Data as of March 31, 2021. Growth and volatility metrics are based on five-year historical data; the other ratios are based on the most recent annual data. All
metrics and ratios are percentages presented as weighted medians. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 3Rising COVID-19 Deaths Sparks New Waves of Restrictions
Philippines, Peru, and Colombia (c.50% of index) fell double-digits due to rising COVID deaths and lockdowns.
1Q21 Index Returns (%) Philippines COVID Deaths
0 400
-5 300
-10 200
-15 100
-20 0
Peru COVID Deaths Colombia COVID Deaths
400 400
300 300
200 200
100 100
0 0
Source: FactSet, MSCI Inc.; Data as of March 31, 2021; Our World in Data; Data as of April 15, 2021. https://ourworldindata.org/covid-cases
Deaths are shown as 7-day rolling averages. Smoothed Peru data in July and August due to reporting irregularity. HARDING LOEVNER 4Currency Headwinds in 1Q21
Many FEM currencies slipped again in 1Q21 after bouncing back from 2020 lows.
3/31/20-12/31/20 1Q21
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Source: Bloomberg; Data as of March 31, 2021. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 5MSCI FEM vs World Returns by Quality, Growth, and Value Rank
No style headwind in FEM.
Quality Quintiles Growth Quintiles Value Quintiles
15 15 15
1Q21 10 10 10
Unlike in DM, 5 5 5
highest quality
0 0 0
and growth
FEM stocks -5 -5 -5
outperformed.
-10 -10 -10
-15 -15 -15
Highest Lowest Fastest Slowest Least Most
Exp. Exp.
Quality Quintiles Growth Quintiles Value Quintiles
60 60 60
50 50 50
2020 40 40 40
Like in DM, 30 30 30
highest quality 20 20 20
and expensive
10 10 10
stocks
outperformed 0 0 0
in FEM. -10 -10 -10
-20 -20 -20
Highest Lowest Fastest Slowest Least Most
Exp. Exp.
MSCI FEM Index MSCI World Index
Source: FactSet, MSCI Inc., HOLT; Data as of March 31, 2021. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 6Benchmark Sector/Region Returns
First Quarter
Sector Total Return (%) Region Total Return (%)
Energy 6.6 Europe 6.8
Materials 0.2
HL Frontier EM Composite -1.8 Gulf States 0.4
Comm Services -2.0
Africa -1.5
Health Care -3.2
Info Technology -4.6 HL Frontier EM Composite -1.8
MSCI Frontier EM Index -6.0
MSCI Frontier EM Index -6.0
Cons Staples -6.1
Financials -6.5
Asia -6.2
Real Estate -8.9
Cons Discretionary -9.0 Latin America -11.9
Utilities -10.6
Middle East -58.9
Industrials -11.1
-15.0 -10.0 -5.0 0.0 5.0 10.0 -80.0 -60.0 -40.0 -20.0 0.0 20.0
Source: FactSet, MSCI Inc.; Data as of March 31, 2021. Past performance does not guarantee future results. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 7Performance Attribution: Composite vs Benchmark
First Quarter
Sector Top 5 Contributors
2.0 Avg Wt. % Effect
Selection Effect 3.2
Allocation Effect 1.0 to Relative Returns Port. Index %
Total Effect 4.2 Agthia 1.7 0.0 0.76
1.0
Effect (%)
Network International 2.4 0.0 0.74
0.0 EPAM 4.2 0.0 0.69
Solidere* 0.0 0.5 0.61
-1.0
INFT INDU DSCR MATS RLST STPL UTIL FINA HLTH CASH COMM ENER Hoa Phat Group 4.7 1.7 0.55
Region Top 5 Detractors
2.0
Selection Effect 1.4 Avg. Wt. % Effect
Allocation Effect 2.8 from Relative Returns Port. Index %
1.0 Total Effect 4.2
Southern Copper* 0.0 3.4 -0.35
Effect (%)
Vingroup* 0.0 2.2 -0.34
0.0
Kazatomprom* 0.0 0.8 -0.28
-1.0 Vinhomes* 0.0 2.0 -0.27
DEV LATAM GULF ASIA MIDEAST CASH AFRICA EUROPE
CD Projekt 0.8 0.0 -0.27
MARKET
LISTED¹
*Not held in the portfolio; its absence had an impact on
the portfolio's return relative to the Index.
1Includes companies in frontier markets or small emerging markets listed in developed markets. “Composite”: Frontier Emerging Markets Composite. “Benchmark”: MSCI Frontier Emerging
Markets Index. Past performance does not guarantee future results. Sector and Region Attribution and Contributors and Detractors are shown as supplemental information only and
complement the fully compliant Frontier Emerging Markets Composite GIPS Presentation. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It
should not be assumed that investment in the securities identified has been or will be profitable. The following information is available upon request: (1) information describing the
methodology of the contribution data and (2) a list showing the weight and relative contribution to return of all holdings during the quarter. Contribution is the contribution to overall relative
performance over the quarter. Contributors and detractors exclude cash and securities in the Composite not held in the Model Portfolio. Quarterly data is not annualized. Please read the
disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 8Benchmark Sector/Region Returns
Trailing 12 Months
Sector Total Return (%) Region Total Return (%)
Info Technology 136.2
Europe 56.7
Materials 100.5
Cons Discretionary 75.8 HL Frontier EM Composite 47.3
Energy 49.0
Latin America 41.5
HL Frontier EM Composite 47.3
Health Care 46.6
Asia 38.9
Utilities 44.0
Cons Staples 38.7 MSCI Frontier EM Index 34.0
Industrials 34.3
Africa 30.2
Real Estate 34.0
MSCI Frontier EM Index 34.0 Gulf States 20.6
Comm Services 27.3
Middle East -49.4
Financials 20.1
0.0 50.0 100.0 150.0 -100.0 -50.0 0.0 50.0 100.0
Source: FactSet, MSCI Inc.; Data as of March 31, 2021. Past performance does not guarantee future results. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 9Performance Attribution: Composite vs Benchmark
Trailing 12 Months
Sector Top 5 Contributors
8.0 Avg Wt. % Effect
Selection Effect 2.6
to Relative Returns Port. Index %
Allocation Effect 11.5
Total Effect 14.1 Hoa Phat Group 4.6 1.1 4.11
4.0
Effect (%)
EPAM 4.3 0.0 2.43
0.0 Globant 4.5 3.5 1.63
Agthia 1.3 0.0 1.10
-4.0
FINA INFT MATS STPL INDU DSCR COMM ENER HLTH UTIL CASH RLST Zenith Bank 1.8 0.4 0.78
Region Top 5 Detractors
8.0
Selection Effect 8.6 Avg. Wt. % Effect
Allocation Effect 5.5 from Relative Returns Port. Index %
Total Effect 14.1 Southern Copper* 0.0 2.3 -1.52
4.0
Effect (%)
Mabanee 2.7 0.4 -0.64
0.0 CD Projekt 0.3 0.0 -0.63
Ayala* 0.0 2.3 -0.56
-4.0
ASIA GULF DEV LATAM AFRICA MIDEAST EUROPE CASH Vinhomes* 0.0 1.6 -0.56
MARKET
LISTED¹ *Not held in the portfolio; its absence had an impact on the
portfolio's return relative to the Index.
1Includes companies in frontier markets or small emerging markets listed in developed markets. “Composite”: Frontier Emerging Markets Composite. “Benchmark”: MSCI Frontier Emerging
Markets Index. Past performance does not guarantee future results. Sector and Region Attribution and Contributors and Detractors are shown as supplemental information only and
complement the fully compliant Frontier Emerging Markets Composite GIPS Presentation. The portfolio holdings identified above do not represent all of the securities held in the portfolio. It
should not be assumed that investment in the securities identified has been or will be profitable. The following information is available upon request: (1) information describing the
methodology of the contribution data and (2) a list showing the weight and relative contribution to return of all holdings during the period. Contribution is the contribution to overall relative
performance over the period. Contributors and detractors exclude cash and securities in the Composite not held in the Model Portfolio. Data is not annualized. Please read the disclosures on
the last page, which are an integral part of this presentation. HARDING LOEVNER 10Why Did FEM Returns Lag Emerging and Developed Markets in 1Q21?
Financials in FEM did not recover.
Financials Sector Returns
30
20
10
Returns (%)
0
-10
-20
-30
2020 1Q21
MSCI FEM MSCI EM MSCI World
Source: FactSet, MSCI Inc.; Data as of March 31, 2021. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 11Higher Quality FEM Banks Outperformed in 1Q21
MSCI FEM Financials 1Q21 Returns by Quality and Leverage Ranks.
1Q21 Returns by Quality Rank 1Q21 Returns by Leverage Rank
4 4
0 0
-4 -4
Return (%)
Return (%)
-8 -8
-12 -12
-16 -16
High Quality Mid Quality Low Quality Low Leverage Mid Leverage High Leverage
Source: FactSet, MSCI Inc., HOLT; Data as of March 31, 2021. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 12HL Financials Performance Since Inception
Our Financials have outperformed the broad FEM index historically.
Growth of $100
400
350
300
250
200
150
100
50
HL FEM Financials MSCI FEM Financials MSCI FEM Total
Source: FactSet, MSCI Inc.; Data as of March 31, 2021. Please read the disclosures on the last page, which are an integral part of this presentation. Past performance does not guarantee future results. You cannot
invest directly in an index. Performance is shown gross of fees. HARDING LOEVNER 13Portfolio Transactions
1Q21 Additions
1Q21 Additions by Quality Rank and Growth Rank
DSCR STPL FINA INDU
1.00
Halyk Savings Bank
Bupa Arabia
Sabeco
Company Country Sector
0.75
Wilcon Depot Jollibee Foods Philippines Cons Discretionary
Wilcon Depot Philippines Cons Discretionary
Equity Group Universal Robina Philippines Cons Staples
Growth Rank
Sabeco Vietnam Cons Staples
Halyk Savings Bank Kazakhstan Financials
0.50 Universal Robina
Equity Group Kenya Financials
Marsa Maroc Bupa Arabia Saudi Arabia Financials
Jollibee Foods Marsa Maroc Morocco Industrials
0.25
0.00
0.00 0.25 0.50 0.75 1.00
Quality Rank
Portfolio Turnover (5 year annualized average): 23.4%
Source: HOLT; Data as of March 31, 2021. Please read the disclosures on the last page which are an integral part of this presentation. The Portfolio is actively managed therefore holdings shown may not be current.
The security holdings identified do not represent all of the security held in the portfolio. It should not be assumed that investment in the security identified has been or will be profitable. HARDING LOEVNER 14Portfolio Exposures
As of March 31, 2021
Sector HL % FEMI % (Under) / Over Geography HL % FEMI % (Under) / Over
Cons Staples 16.1 7.1 Dev Market Listed¹ 8.4 —
Info Technology 12.1 4.5
Cons Discretionary 5.3 1.0 Africa 19.8 17.1
Health Care 5.7 2.0 Gulf States 5.5 4.3
Cash 1.0 —
Financials 34.2 34.0 Cash 1.0 —
Energy 4.2 5.1 Europe 11.0 10.1
Comm Services 6.3 8.5
Materials 5.1 8.4 Middle East 0.0 0.4
Utilities 0.0 3.7 Latin America 15.8 22.6
Industrials 5.3 11.8
Real Estate 4.7 13.9 Asia 38.5 45.5
(10.0) (5.0) 0.0 5.0 10.0 (10.0) (5.0) 0.0 5.0 10.0
Ten Largest Holdings – Total Weight: 39.6%
Company Country Sector Wt (%) Company Country Sector Wt (%)
Hoa Phat Group Vietnam Materials 4.8 SM Prime Holdings Philippines Real Estate 4.0
EPAM US Info Technology 4.6 Vietnam Dairy Products Vietnam Cons Staples 3.8
Globant Argentina Info Technology 4.5 Banca Transilvania Romania Financials 3.7
Safaricom Kenya Comm Services 4.1 Ecopetrol Colombia Energy 3.1
Commercial International Bank Egypt Financials 4.0 Halyk Savings Bank Kazakhstan Financials 3.0
1Includes companies in frontier markets or small emerging markets listed in developed markets. Current frontier markets exposure in the portfolio is 40.0% and emerging markets exposure is
50.6%. Sector and Region weights, holdings, and active share are shown as supplemental information only and complement the fully compliant Frontier Emerging Markets Composite GIPS
Presentation. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 15Portfolio vs Benchmark by Country
• HL FEM is more diversified vs concentrated index
• Iceland will be included in MSCI FEM Index in May 2021
100.0%
90.0%
Other, 21.0%
Other, 37.9%
80.0%
Egypt, 3.7%
Kenya, 3.7%
70.0% Argentina, 5.2%
Morocco, 5.6%
60.0% Egypt, 5.9%
Colombia, 7.4%
Kenya, 5.9%
50.0%
Argentina, 4.5% Peru, 9.9%
Morocco, 2.7%
40.0% Colombia, 6.5%
Vietnam, 13.4%
Peru, 4.8%
30.0%
Vietnam, 12.8%
20.0%
Philippines, 30.0%
10.0% Philippines, 19.0%
0.0%
Portfolio Benchmark
Source: FactSet, MSCI Inc.; Data as of March 31, 2021. Please read the disclosures on the last page, which are an integral part of this presentation. HARDING LOEVNER 16Harding Loevner Profile
As of March 31, 2021
46 investment professionals
Frontier Emerging Markets portfolio management team averages 11 years at Harding Loevner
Strategy Assets Firm Assets
Global $22.6B 27%
International (non-US) $41.6B 49%
Emerging Markets $19.0B 23%
Chinese EquityDisclosures
The information provided in this Presentation should not be considered a recommendation to purchase or sell a particular security. Unless otherwise stated, non-performance based criteria have been used to select the securities
listed. The portfolio is actively managed therefore securities shown may not be current. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of portfolio
holdings for the past year contact Harding Loevner.
Investing in stocks entails the risks of market volatility. The value of all types of stocks may increase or decrease over varying time periods. To the extent the investments depicted herein represent international securities, you
should be aware that there may be additional risks associated with international investing, including foreign economic, political, monetary and/or legal factors, changing currency exchange rates, foreign taxes, and differences in
financial and accounting standards.
Quality & Growth Characteristics, Benchmark Returns, Performance Attribution, Portfolio Exposures, and Portfolio Transactions are shown as supplemental information only and complement the fully compliant Frontier Emerging
Markets Composite GIPS Presentation, which is available on request.
Alpha: a measure of risk-adjusted return. Beta: a measure of the portfolio’s sensitivity to the market. R-Squared: a measure of how well a portfolio tracks the market. Standard Deviation: the statistical measure of the degree to
which an individual value in a probability distribution tends to vary from the mean of the distribution. Information Ratio: a measure of risk-adjusted return calculated by dividing the portfolio active return (i.e., portfolio returns
minus benchmark return) by the standard deviation of the active return. Sharpe Ratio: the return over the risk free rate per unit of risk. Up/Down Capture: a measure of the manager’s performance in up/down markets relative to
the market itself. Profit Margin: relationship of gross profits to net sales. Return on Assets: net income for past 12 months divided by total assets. Return on Equity: the net income divided by total common equity outstanding,
expressed as a percent. Debt/Equity Ratio: total long-term debt divided by total shareholder’s equity. Sales Per Share: the total revenue earned per share over a 12-month period, net of returns, allowances, and discounts. Earnings
Per Share: portion of a company’s profit allocated to each outstanding share of common stock. Cash Flow: a measure of the cash generating capability of a company calculated by adding non-cash charges (e.g. depreciation) and
interest expense to pretax income. Turnover: calculated by dividing the lesser of Purchases or Sales by Average Capital. Active Share: the proportion of holdings by weight that differ from holdings of the benchmark index. Tracking
Error: the standard deviation of the difference between the strategy and index performance.
The MSCI Frontier Emerging Markets Index is a free float-adjusted market capitalization index designed to measure equity market performance in all countries from the MSCI Frontier Markets Index and the lower size spectrum of
the MSCI Emerging Markets Index. The Index consists of 27 frontier markets and 7 emerging markets. You cannot invest directly in this Index.
All performance and data shown are in US dollar terms, unless otherwise noted.
Harding Loevner’s Quality, Growth, and Value rankings are proprietary measures determined using objective data. Quality rankings are based on the stability, trend, and level of profitability, as well as balance sheet strength.
Growth rankings are based on historical growth of earnings, sales, and assets, as well as expected changes in earnings and profitability. Value rankings are based on several valuation measures, including price ratios.
The Composite and Attribution returns may show discrepancies due to the different data sources for these returns. Composite performance is preliminary and obtained from Harding Loevner’s accounting system and Attribution
returns are obtained from the FactSet portfolio analysis system. Please note returns from FactSet are not audited for GIPS compliance and are for reference only.
Source (Benchmark Performance, Performance Attribution, Contributors and Detractors): FactSet, Harding Loevner Frontier Emerging Markets Composite; MSCI Inc.
Source (Quality & Growth Characteristics [Run date: April 6, 2021, based on the latest available data in FactSet on this date.], Portfolio Transactions, Portfolio Exposures, Ten Largest Holdings, Portfolio Allocation Comparison):
FactSet; Harding Loevner Frontier Emerging Markets Model; MSCI Inc. and S&P.
Source (Investment Statistics): eVestment Alliance; Harding Loevner Frontier Emerging Markets Composite, based on composite returns.
MSCI Inc. and S&P do not make any express or implied warranties or representations and shall have no liability whatsoever with respect to any GICS data contained herein.
FactSet Fundamentals, Copyright 2021 FactSet Research Systems, Inc. All rights reserved.
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