Martin Currie Emerging Markets Portfolios

Investment Overview

The Martin Currie Emerging Markets Portfolios provide investors with full access to the return potential of emerging market equities through a hybrid structure that uses both a pooled vehicle and American Depository Receipts (ADRs). The pooled vehicle helps Martin Currie provide clients with exposure to equity and related securities of emerging market and developing countries that are difficult to access through ADRs. The hybrid structure retains the customization and tax advantages of a Separately Managed Account (SMA) for directly held securities while broadening the investment universe through the pooled vehicle.
 

Portfolio Construction

  • High-conviction portfolio of 40-60 stocks
  • Portfolio construction is the responsibility of the entire team
  • Sophisticated risk management is key
  • Build portfolios where risk is dominated by the highconviction stock choices we make
  • Size of a position in our portfolios is determined by our risk-adjusted conviction in the idea
  • The Portfolios anticipate maintaining a minimum of 50% allocation to individual securities via ADRs

 

Key Differentiators

Distinctive Structure

  • Utilizes an institutional-style hybrid approach for the strategy that combines investments in ADRs with investments in shares of a newly created pooled vehicle
  • Provides access to a greater breadth of exposure to emerging market companies than can be found through ADRs alone
  • Retains the customization advantages of a Separately Managed Account (SMA) for directly held securities while broadening the investment universe through the pooled vehicle

High-Conviction Approach

  • The investment team focuses on the highest-conviction ideas to build a stock-driven portfolio that is broadly diversified across countries and sectors

Risk Management

  • A comprehensive risk management framework, which includes factor-based stress testing and an independent risk management team. The Portfolio is managed to ensure that relative outperformance is delivered on the strength of stock performance and not on a particular market outcome.

ESG Integration and Engagement

  • ESG analysis is embedded into the investment process. There is a strong focus on governance, which Martin Currie believes is a fundamental determinant of long-term performance. With a focus on stewardship, Martin Currie take a proactive approach to engagement and voting activity. This has led to Martin Currie being awarded the highest possible (A+) rating awarded by the PRI1.
     

1PRI – Principles for Responsible Investment. Engagement and voting activity is for the period 1/1/2017 through 12/31/2017.

Diversification does not guarantee a profit or protect against a loss.

There is no guarantee that the Portfolio's objectives will be met.

 

 

Investment
Process

There are four components to the investment process, each with a clear outcome: to track the journey of an investment from early idea to inclusion in the Portfolio.

Idea generation

  • Seeks to uncover companies where the team believes the market is underestimating the long-term economic value creation from sustained profitability and growth.
  • Stock ideas passing this initial stage will be added to the research agenda and advanced a stage to in-depth fundamental analysis.

Fundamental research

Research is focused on three key areas:

  • Financial – To assess the key drivers of a company’s historic financial performance and model how it is likely to evolve.
  • Qualitative – To understand the conditions under which each company has operated and where it sits in relation to its lifecycle. ESG analysis is carried out at this stage to assess the materiality of ESG factors.
  • Top-down – To ensure that the Portfolio is sufficiently compensated for investing in stocks with country-specific risks.

Stock discussion

  • Each investment thesis is discussed, debated and challenged.
  • Unanimous approval allows the stock to progress to the Approved Research List

Portfolio construction

  • The entire team determines the weights and inclusion of stocks in the portfolios.
  • Portfolio changes can be recommended by any member of the team at any time and require broad agreement across the Emerging Markets team before being actioned.
  • Portfolio risk reflects the high-conviction investments made at a stock level.
  • Balance is achieved through investing in a diversified range of countries and sectors.

The investment process may change over time. The characteristics set forth above are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. There is no guarantee investment objectives will be achieved.

 

 

meet your managers

Active equity specialist that builds global, stock-driven portfolios based on fundamental research – devoted to delivering optimum investment outcomes and superior client relationships.


Kim Catechis

Head of Global Emerging Markets

Andrew Mathewson, CFA

Portfolio Manager

To find out more about the Martin Currie Emerging Markets Portfolios, talk to your financial advisor.


 

What I Should Know
Before Investing

All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met.  The managers invest the portfolios primarily in ADRs, but may also make limited investments in U.S.-traded stocks of non-U.S. and U.S. companies engaged in significant non-U.S. business. These limited investments may include U.S.-traded stocks that result from the conversion of ADRs, as well as other U.S.-traded stocks. The portfolios' investments in non-U.S. companies may include companies in developed and emerging markets which involve risks in addition to those ordinarily associated with investing in U.S.-traded stocks, including the potentially negative effects of currency fluctuation, political and economic developments, foreign taxation and differences in audition and other financial standards.  These risks are magnified in emerging markets. Investments may be made in small- and mid-cap companies, which involve a higher degree of risk and volatility than investments in large-cap companies. 

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IMPORTANT INFORMATION: Past performance is no guarantee of future results. Management and performance of individual accounts may vary for reasons that include the existence of different implementation practices and model requirements in different investment programs.

Pure Gross performance shown does not reflect the deduction of investment management fees and certain transaction costs, which will reduce portfolio performance. Net performance includes the deduction of a 3% annual wrap fee for equity and balanced portfolios and a 1.5% annual wrap fee for fixed income portfolios. These deducted fees amounts are the maximum anticipated wrap fees. Actual fees may vary. For fee schedules, contact your financial professional or, if you enter into an agreement directly with Legg Mason Private Portfolio Group, LLC ("LMPPG"), refer to LMPPG's Form ADV disclosure document. Returns reflect the reinvestment of dividends and other earnings.

An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. 

Please see GIPS® endnotes for important additional information regarding the portfolio performance shown and for effects of fees. 

Performance Source: Legg Mason

Hypothetical growth of dollars: For illustrative purposes only. Assumes no withdrawals or contributions. The performance results shown were calculated assuming reinvestment of dividends and income and take into account both realized and unrealized capital gains and losses.

Beginning February 1, 2018, the composite includes only SMA portfolios that are managed in accordance with the Martin Currie Global Emerging Markets strategy. Prior to February 2018, performance results were calculated using the Martin Currie Global Emerging Markets Composite, which was comprised of institutional accounts. Net total returns were calculated by reducing the institutional gross-offees performance by the highest bundle fee of 3.0%. Martin Currie follows substantially the same investment philosophy, strategies and processes in managing SMA portfolios that it does in managing institutional portfolios. The performance of the Martin Currie Global Emerging Markets SMA Composite may vary from the performance of the institutional composite, especially over shorter time periods and during periods of extraordinary market conditions. The SMA portfolios are implemented through a combination of individual holdings along with an allocation to a no-load mutual fund share created to allow the portfolio managers to replicate the same themes and characteristics of the managed institutional and mutual fund strategy. Members in the institutional composite typically hold individual securities.

IMPORTANT INFORMATION: Separately Managed Accounts (SMAs) are investment services provided by Martin Currie, a federally registered investment advisor. Client portfolios are managed based on investment instructions or advice provided by Martin Currie. Management is implemented by the program sponsor or its designee.

Professional money management may not be suitable for all investors. Factual information relating to the securities discussed was obtained from sources believed to be reliable, but there can be no guarantee as to its accuracy. It should not be assumed that investments made in the future will be profitable or will equal the performance of the securities discussed in the material.

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Holdings, sector weightings, market capitalization and portfolio characteristics are subject to change at any time and are based on a representative portfolio. Holdings, sector weightings, market capitalization and portfolio characteristics of individual client portfolios in the program may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities and sectors listed. 

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Martin Currie Global Emerging Markets SMA GIPS Endnotes Composite Net ($USD) - December 31
Year Net total return (%) “Pure”1 gross total return (%) Benchmark total return (%) Number of portfolios Bundled fee portfolios (%) Internal dispersion (%) Gross total 3 Yr. St. Dev. (%) Benchmark total 3 Yr. St. Dev. (%) Composite assets ($mm) Firm assets (%)
2008 -56.97 -55.64 -53.18 4 0 N/A 30.97 30.95 270.28 1.90
2009 57.89 62.78 79.02 5 0 N/A 32.91 34.03 298.69 1.54
2010 18.16 21.82 19.20 5 0 1.97 32.95 34.23 179.93 0.98
2011 -17.83 -15.28 -18.17 7 0 0.62 23.74 25.56 210.84 2.26
2012 17.92 21.57 18.63 10 0 0.34 21.67 21.87 463.85 5.99
2013 -6.94 -4.06 -2.27 11 0 0.21 19.44 19.47 874.07 9.47
2014 -9.42 -6.62 -1.82 12 0 0.89 16.09 15.27 1,239.93 14.03
2015 -15.26 -12.64 -14.60 10 0 0.70 14.69 14.34 1,019.78 13.18
2016 9.18 12.56 11.60 8 0 0.66 16.55 16.22 1,062.12 15.92
2017 44.68 49.15 37.75 10 0 1.09 15.70 15.43 2,165.47 25.45

Martin Currie claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Martin Currie has been independently verified to December 31, 2016. The verification report is available upon request.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The verification does not ensure the accuracy of any specific composite presentation.

For GIPS® purposes, the Firm is Martin Currie, which encompasses Martin Currie Investment Management Ltd and Martin Currie Inc. Martin Currie is a wholly owned subsidiary of Legg Mason, Inc. (“Legg Mason”) but operates autonomously, and Martin Currie, as a firm, is held out to the public as a separate entity.

The composite strategy consists of actively managed global emerging markets portfolios made up of segregated and pooled accounts. The portfolios in the composite have objectives to outperform the stated benchmark over rolling three-to-five year periods. Investing in all or any of the emerging markets countries, the portfolios invest in shares of companies, and the value of these shares could be negatively affected by changes in the company or its industry of the economy in which it operates. Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. Accordingly, investment in emerging markets is generally characterised by higher levels of risk than investment in fully developed markets. The composite portfolios may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the portfolio’s value than if it held a larger number of investments. The composite portfolios typically have an all-cap approach and therefore may invest in some smaller companies which may be riskier and less liquid than larger companies. The composite portfolios may invest in derivatives to obtain, increase or reduce exposure to underlying assets. The use of derivatives may restrict potential gains and may result in greater fluctuations of returns for the portfolios. Certain types of derivatives may become difficult to purchase or sell in such market conditions. The composite was created July 2007. The index used is the MSCI EM (Emerging Markets) Index (gross income) to January 31, 2018 then MSCI EM (Emerging Markets) Index (net income).

Beginning February 1, 2018, the composite includes only SMA portfolios that are managed in accordance with the Martin Currie Global Emerging Markets strategy. Prior to February 2018, performance results were calculated using the Martin Currie Global Emerging Markets Composite which was comprised of institutional accounts. Net total returns were calculated by reducing the institutional gross-of-fees performance by the highest bundle fee of 3.0%. Martin Currie follows substantially the same investment philosophy, strategies and processes in managing SMA portfolios that it does in managing institutional portfolios. The performance of the Martin Currie Global Emerging Markets SMA Composite may vary from the performance of the institutional composite, especially over shorter time periods and during periods of extraordinary market conditions. The SMA portfolios are implemented through a combination of individual holdings along with an allocation to a no load mutual fund share created to allow the portfolio managers to replicate the same themes and characteristics of our managed institutional and mutual fund strategy. Members in the institutional composite typically hold individual securities.

For comparison purposes, composite returns are shown against returns of the MSCI EM (Emerging Markets) Index, which is a rules-based, market-value-weighted index, which captures large and mid cap representation across 24 Emerging Markets (EM) countries. An investor cannot invest directly in an index.

1“Pure” gross returns are presented as supplemental information to the net returns. The current fee schedule is 3.0% on all assets. Net returns are calculated by deducting the anticipated maximum annual bundled fee applied on a monthly basis from the "pure" gross monthly return. The bundled fee includes all charges for trading costs, portfolio management, custody, and other administrative fees. Bundled fees may vary across different financial firms and across different accounts based upon account size and other factors. Returns and market values are expressed in USD.

Dispersion is calculated using the asset-weighted standard deviation of annual returns of those portfolios that were included in the composite for the entire year. Periods with five or fewer accounts are not statistically representative and are not presented. The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. Standard deviation is not presented for periods where 36 monthly returns are not available for the composite or the benchmark.

Past investment results are not indicative of future investment results.

Martin Currie’s list of composite descriptions and policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Please contact enquiries@martincurrie.com.

All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s webpage for specific details regarding investment objective, risks associated with hedge funds, alternative investments and other risks, performance and other important information. Review this information carefully before you make any investment decision.

Certain SMA products may not be available at all firms. 

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