Quarterly Report November 2015
Global Equity Fund Update
THE FUND
The Global Equity Fund was established
in 2009 by the Dean of the Robert H.
Smith School of Business and the Board
of Directors of the Robert H. Smith
School of Business Foundation, Inc. The
Fund's goal is to achieve long-term
capital appreciation by capturing the
superior returns that equity investments
have historically provided and to
outpace the appreciation of the MSCI All
Country ex US Index (ACWX). The Fund
is managed by a mix of MBA and
Masters of Finance students for a one
year term starting in May.
FUND STRATEGY
 Maintains portfolio diversification and
seeks prudent long-term growth of
capital with an emphasis on countries,
regions and macro-economic sectors
undervalued or fairly valued and
poised for growth.
 Uses a top-down research process
that
targets
investments
in
companies, countries, regions and
macro-economic sectors with steady
earnings growth that is not yet fully
reflected in its price.
 Sector and region momentum models
are used to identify potential areas of
growth, equities within those sectors
and/or regions are then screened for
fundamentals conducive to the fund’s
investment objectives.
Top Holdings (%)
NTES
5.39%
CBPO
5.28%
WX
4.95%
LXFT
4.49%
MRAAY
4.24%
MZDAY
4.06%
SHPG
3.97%
MGDDY
3.85%
AGN
3.71%
Competitive Advantages
 To achieve its investment objective and minimize inherent risks
involved in investments, the Fund is diversified globally. Our team
applies diversification of investment in countries, regions and macroeconomic sectors by using different investment tools. In the process
of global investment, foreign exchange risk will be hedged to a
minimum level.
 The team assumes the market is semi-efficient and seeks to invest in
sectors undervalued or fairly valued and poised for growth. Through
disciplined research and patience, the team seeks to generate superior
returns by investing in companies, sectors, or indexes whose analysis
indicates are poised for fundamental improvement not reflected in
their current prices.
Region Allocation (%)
Regions
China
Emerging
Market
Europe
Japan
Other
N/A
Portfolio
ACWX
9.87%
3.19%
24.72%
39.78%
13.28%
11.92%
0.42%
Sector Allocation (%)
5.65%
36.86%
16.22%
37.38%
0.70%
Transaction (5/1/15- 11/6/15)
Position Sold
15
Gain: Loss Positions
6：9
Gain: Loss ($ Ratio)
0.84：1
GEF vs. ACWX Growth, 2015 May-November
5.0%
0.0%
(5.0%)
(10.0%)
(15.0%)
(20.0%)
May 2015
Jun 2015
Jul 2015
ACWX
Source: Global Equity Fund reports and Yahoo.com
Aug 2015
GEF
Sep 2015
Oct 2015
Market Outlook
Global economic growth remains moderate. Outlook for advanced economies is improving, while developing
markets are projected to grow at a slower pace.
In the US, output remains on a solid growth trend, driven by increasing household demand. Domestic demand is
likely to be sustained by supportive financial conditions, the improving labor market, increasing household
purchasing power from low energy prices and the stronger dollar. Despite these encouraging views, the U.S.
stock market might be dragged down by an unfavorable global economic condition, as many U.S. companies
have revenues generated outside the country.
Economies of the Euro area and Japan can be spurred by the collapse in the oil prices and quantitative easing.
However, Japan’s economy may be dampened by a sharp slowdown in external demand and sluggish private
consumption. In China, the manufacturing sector is still weak, but demand for services such as tourism and
healthcare has been increasing during the year. Economic growth in China is expected to be 6.2% in 2016,
dragged down from this year’s 7% by weakening property construction and overcapacity in industrial and mining
sectors. The volatile stock market witnessed ups and downs throughout the year. In 2016, investor sentiments
may sway stock markets.
One industry we would like to review is the financial industry. An interest rate raise by the Fed would begin to
change investors’ investment preference from real estate and utility sectors to the banking sector. The fund
invests less in the financial sector compared to ACWX, even though the financial sector ETFs generally have
lower P/E and P/B multiples. To invest more in the profitable financial firms, the analyst team plans to develop a
valuation model to evaluate these firms. Meanwhile, the team should pay attention to regulation changes in
financial industries in some specific markets, such as MiFID II in Europe and IPO registration rules in China.
Sources:
Uneven Growth: Short- and Long-Term Factors, IMF World Economic Outlook (WEO)
OECD Economic Outlook, Volume 2015 Issue 2 Preliminary Version
OECD 2016 Economic Outlook
Economy Strong but Markets Unstable, U.S. Economic Outlook for 2015
European economy guide, The Economist
China’s Stock Markets Will See No Gain In 2016, UBS
For additional information about the Global Equity Fund or its current members please visit:
http://www.rhsmith.umd.edu/programs/part-time-mba/academics/experiential-learning/global-equity-fund