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2009 Annual Fund Performance Review

With hindsight, many investors were over-pessimistic over the course of the brutal sell-off in 2008 as well as early 2009, and also underestimated the power of emerging economies, especially China, thereby missing the rebound since the second quarter of 2009.

With hindsight, many investors were over-pessimistic over the course of the brutal sell-off in 2008 as well as early 2009, and also underestimated the power of emerging economies, especially China, thereby missing the rebound since the second quarter of 2009. Global equity market ended the year with stellar returns – the average fund in the Morningstar Global Large-cap Blend Equity and Morningstar Global Small/Mid-Cap Equity rose 31.15% and 39.98% respectively. Global equities primarily shone on stronger-than-expected recovery and less-than-expected missteps made by central banks around the global, though some would argue that it’s too early to conclude.

The turnaround in U.S. equity market last year is impressive, but funds in the Morningstar U.S. Large-cap Blend Equity and the Morningstar U.S. Small-cap Equity registered gains of 27.82% and 35.19% respectively, slightly underperforming global equity funds. This underperformance is no surprise to investors as many global equity funds nowadays have exposures to emerging market plays, which in general outperformed U.S. equities in 2009. For instance, the average fund in the Morningstar Global Large-cap Growth Equity has 4.37% of the total assets invested in Chinese equities.  

In 2009, emerging markets led the run. The average fund in the Morningstar Russia Equity category and the Morningstar Brazil Equity rose 139.10% and 133.07% respectively. There is little doubt that many investors are gaining interests to the emerging world nowadays, as the western world is at a big risk of losing steam. Brazil, for example, rode out the recession much earlier than developed countries while the inflation is also subdued. One of the most pleasing aspects of Brazil is its growth prospect. While U.S. and U.K are still struggling to find new growth momentum, Brazil sits on rich natural resources and will host two biggest sport events – Olympic Game and World Cup – in the coming years. Indeed, this eye-catching growth is not without risk. Emerging countries have to think about cooling down the sizzling economies without hurting the fundamental.

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