SKAGEN's equity funds all performed in line with or better than their respective benchmark indexes in April. Some of the funds' detractors from the beginning of the year seem to have turned a corner and are now positive contributors to the portfolios.
Russia, Brazil and Turkey, which were among the worst markets in 2015, had the strongest performance up until the end of April this year. This has been despite political and economic challenges such as the protests against Brazilian President Dilma Rousseff and the demand for an impeachment process.
There are several reasons for the heightened interest we have seen lately in emerging markets. First, commodity prices have risen since February after having fallen substantially over the past two years. In addition, emerging markets are more interesting for US investors since the US central bank is signalling that they will not hike interest rates as quickly as they had previously indicated.
Companies with significant exposure to emerging markets, such as Citigroup and commodity-producers, fared well during the month. Some of the major negativity that has surrounded emerging markets over the past two years seems to have abated somewhat. Investors now again seem interested in raising their emerging markets exposure.
Benefited from commodity price lift
With slightly better than feared economic figures coming out of emerging markets, commodity prices have stabilised and showed slight upticks. The result has been increases in share prices for some of the commodity producers which were overly punished previously.
SKAGEN Kon-Tiki's top three performers in April were Mahindra & Mahindra, Tullow Oil and CNH Industrial. The first and the latter are both makers of agricultural equipment while Tullow is an oil company. In April, the fund also sold out of DRD Gold after a fantastic journey in 2016 which saw the stock gain more than 200 percent.
Lundin Mining and Lundin Petroleum were among the best performers in SKAGEN Global during the month of April. The fund took the opportunity of adverse reactions to the Microsoft results announcement to add to the position.
The main contributors to the performance of SKAGEN Focus continue to be commodity names. Copper-miner First Quantum extended its rally after posting better than anticipated results in the first quarter and highlighted a significant reduced risk for covenant breaches over the coming 12 months. Pan America Silver pushed higher after the underlying silver price continued to normalise. Both these positions were further reduced into strong performance.
It is too early to say whether emerging markets are completely out of the woods, however. There is still a lot of uncertainty around China and Brazil for example.
You can read more about contributors to the funds' performance and buys and sells during April in the monthly status reports.