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Island Investing

Riffs, rants, and the upside of investing from way off Wall Street


IIM International Portfolios: YTD thru Q3 2023

Hot and Cold

According to a September 5th report released by the Copernicus Climate Change Service (C3S) the June-July-August (JJA) 2023 season was the warmest on record by a large margin, with an average temperature of .66 degrees Celsius above normal. The report noted above average precipitation in many places leading to local flooding and in “western and north-eastern {sic} North America, part of Asia, Chile and Brazil, and north-western Australia.” On the other hand, some areas experienced drier-than-average conditions and a subset of those experienced significant wildfires such as Lahaina, on the northwest coast of the island of Maui, where 98 people were killed on August 8. There are many NGOs trying to address the aftermath of these and other crises; if you would like to help, I suggest the World Central Kitchen at

Parts of the Equity Markets were hot through the first half of the year – until not, as sticky interest rates offered investors better returns in less risky asset classes. According to The Wall Street Journal, the S&P 500 was up 20% at the end of July, but by the end of the third quarter, was up only 12%. They noted that technology stocks Apple and Nvidia, fell 8.9% and 12%, respectively, in September, although they were still up 32% and 198% for the entire nine months. Going deeper into risky assets, the digital assets Morningstar Category surged by 50% in the first half and, during that same period, the best performing equity funds, such as Ark Innovation ETF (ARKK) were those focused on stocks with “high price/earnings multiples, hard-to-predict fortunes or tech.” In the third quarter, the digital assets category average and ARKK fell 10%. If interest rates, stay “higher for longer,” we could see a further correction of risky assets.

Outside of the US, the MSCI Value index, in which three of the top ten stocks were energy companies, outperformed the MSCI Growth index. There was wide dispersion among the performance of specific markets; for instance, US dollar returns for the three largest markets, Japan, UK and China, were +11.6%, +6.7% and -7.13%, respectively. In local currencies, each of these indices would have performed much better.

Our International ADR Model Frigate’s net return was comparable to its benchmark’s gross return. Although Frigate didn’t hold any major blow-ups, obvious detractors were insurance company Prudential PLC and Swedish telecom company Ericsson. Prudential reported good first half-earnings but warned of challenging conditions in some Asian markets. Ericsson is experiencing slower demand in 5G, as operators balance the need to expand network capacity with inflation and macroeconomic uncertainty. Facing margin headwinds in life-sciences and electronics divisions, Merck KGAA’s remained among the worst performers for the first nine months. On the other hand, the share prices of hospitality provider Accor and Fresenius Medical continued to benefit from the reopening of markets and the return of customers. Toyota Motor Company was among the top performers benefitting from its expansion of EV production, the cheaper yen and potential market share gains while employees of US automakers strike. Since inception, Folio estimates Frigate’s time-weighted, cumulative, gross return as 70.63%.

Treasure Harbor greatly lagged its benchmark, whose 15% EM markets exposure was up over 29% due to its successful stocks in which Treasure Harbor can’t invest. Macroeconomic uncertainty and inflation dimmed the outlook for packaging manufacturer Amcor and Diageo, the world’s leading producer of branded premium spirits, which were among the worst performers the first nine months of 2023. Also sporting disappointing returns were Canadian Rogers Communications, with not all stakeholders happy with the Shaw merger, and Spark New Zealand, whose potential slow down in its mobile services concerned investors. On the other hand, French telecom operator Orange, which reported good revenue growth in the second quarter and confirmed guidance, did very well. Persistent great performers were HSBC Holdings PLC (aka Hongkong Shanghai Bank) and ASE Technology, a Taiwanese semiconductor assembler and tester. Investors also seemed happy with Shells Plc’s CEO Wael Sawan and his capital allocation policies; of course, stronger oil prices also helped sentiment. Since inception, Folio estimates Treasure Harbor’s time-weighted, cumulative, gross return as 41.63%.

Exiting the traditionally challenging September, we would hope for calmer capital markets and, in the northern hemisphere, cooler weather. Interestingly, AccuWeather is forecasting that due to the influence of El Niño, northern areas of the US will likely show experience above historical average temperatures this winter and parts of Southwest and Southern states may face below-average temperatures. In other words, predicting the weather or the stock market is much more complex than extrapolating the recent past.

So, as we advise our clients: periodically review your goals, risk tolerance and financial situation. When you work with your advisor, look backward over long periods of time to understand the interaction of valuation, macro-economics and correlation when deciding your asset allocation. We have recently brought onboard a CFP (Certified Financial Planner) here at IIM to do that with our clients, so please let us know if you need assistance in that area.

In the meantime, we wish for you a calm and beautiful fall.

– Lauretta “Retz” Ann Reeves, CFA AMWA


(i) Performance figures are estimated and unaudited. Estimated Benchmark Returns are in the column to the right of its respective Folio. Net Returns are after international taxes on dividends, management fees and trading fees, when necessary. Historical returns are available on request and at Callan and Investment Metrics.
(ii) Gross Return
(iii) Benchmark is 15% SPDR S&P Emerging Markets Dividend ETF + 85% SPDR S&P International Dividend ETF. Returns estimated based on NAV.

Disclaimer: This post nor any of the material linked to herein in any way constitutes investment advice. Historical performance data above represents performance results as reported by the portfolio identified. Performance results are for illustration purposes only. Historical results are not indicative of future performance. Positive returns are not guaranteed. Individual results will vary depending on market conditions and timing of initial investment. Investing may cause capital loss. The publication of this performance data is in no way a solicitation or offer to sell securities or investment advisory services.