Q1 2026 Fund Commentary

Commentary and opinions are provided by Northcape Capital.

Market commentary

The escalation of conflict in the Middle East made March a difficult month for capital markets. Most risk assets declined, and few areas provided shelter apart from cash and crude oil. The sharp drawdown in March erased much of the gains from earlier in the first quarter of 2026, leaving emerging market equities with losses for the full period.

Performance

A holding in America Movil SAB de CV contributed to the Fund’s performance during the quarter. As Latin America’s leading telecom group, the company has built its leadership through consistent investment in broadband and wireless networks. In a challenging March, Mexico and Brazil proved resilient because these countries don’t source energy from the Middle East. In the sub-advisor’s view, the company’s telecom business operates in a utility-like manner and should be relatively insulated from the economic effects of higher energy prices, which it could pass on through pricing adjustments. The company also reported better-than-expected results for the fourth quarter of 2025, driven by market share gains in wireless data and broadband in its two largest markets.

At a sector level, security selection in the communication services sector contributed to the Fund’s performance. From a country perspective, the Fund’s underweight allocation to China and overweight allocation to Mexico also contributed to performance.

A holding in HDFC Bank Ltd. detracted from the Fund’s performance during the quarter. As the largest private bank in India, the company was affected by the conflict in the Middle East and the resulting negative impact on India’s energy costs and economic growth. India is one of the more exposed countries, with a significant share of its total energy supply coming through the Strait of Hormuz. As one of the country’s largest banks, HDFC Bank was seen as exposed because higher fuel prices could reduce loan growth and credit card volumes. A change in the company’s leadership in March also weighed on sentiment, though a subsequent review by the Reserve Bank of India reported no material governance concerns. In the sub-advisor’s view, India remains one of the most under-banked countries in emerging markets, and HDFC Bank could benefit from long-term growth in the country’s banking sector.

Security selection in the financials sector detracted from the Fund’s performance. From a country perspective, overweight allocations to India and Indonesia detracted from performance.

Portfolio activity

During the quarter, the sub-advisor reduced exposure to the semiconductor sector and cut allocations to Indian financial and automobile sectors, as well as Polish retail. The sub-advisor redeployed capital into the emerging market consumer and telecommunications sectors and added to the Fund holdings in two Brazilian companies, one in the health care sector and the other in the renewable energy sector.

Outlook

There haven’t been any changes to the strategic position of the Fund. The Fund remains focused on investing in structural growth companies with defendable business models, balance sheet strength and high or improving returns on capital.