Emerging and frontier markets in Africa and the Middle East generally declined in U.S. dollar terms in the fourth quarter amid slowing global growth and increased risk aversion. Also, a stronger dollar reduced local returns in dollar terms. Falling oil prices weighed heavily on stocks of oil-producing nations in the Middle East. Shares in Saudi Arabia and the United Arab Emirates dropped more than 20%, while equities in Oman and Kuwait fell 16% and 14%, respectively. In Africa, Nigerian shares tumbled 26%, but stocks in Ghana and Kenya rose slightly. Egyptian equities fell more than 8%, but South African shares rose about 3%.
The Africa & Middle East Fund returned −6.61% in the quarter compared with −5.32% for the Lipper Emerging Markets Funds Average and −9.83% for the S&P Emerging/Frontier ME & Africa BMI ex IL. For the 12 months ended December 31, 2014, the fund returned 9.22% versus −3.23% for the Lipper Emerging Markets Funds Average and 2.47% for the S&P Emerging/Frontier ME & Africa BMI ex IL. The fund's average annual total returns were 9.22%, 9.84%, and 2.23% for the 1-, 5-, and Since Inception (09/04/2007) periods, respectively, as of December 31, 2014. The fund's expense ratio was 1.47% as of its fiscal year ended October 31, 2013.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Africa & Middle East Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
The fund's relative performance was helped by stock selection in several countries, especially Saudi Arabia and, to a lesser extent, the United Arab Emirates, Qatar, and South Africa. Country allocations detracted from our performance advantage, primarily because of our deep underweight in South Africa. South Africa's economy continues to suffer from high unemployment, occasional labor unrest, sluggish growth, and elevated inflation, and we believe other countries in the region offer better long-term growth opportunities. Still, some South African companies are very well managed, and we like those that are expanding successfully into other parts of Africa.
The long-term outlook for the African and Middle Eastern region remains robust, driven by favorable demographics, rising urbanization and levels of infrastructure investment, and a strong asset base in natural resources. While many emerging markets are undergoing a growth slowdown, many African and Middle Eastern markets are continuing to grow at high rates, driven by structural domestic demand. In the Middle East, we believe the major oil producers are in a strong position to weather the downturn in oil prices. In North Africa, the outlook is improving as countries in the region are net importers of oil and should benefit from lower oil prices. In sub-Saharan Africa, economic growth is underpinned by a young population. As for South Africa, we remain cautious given the weak consumer environment. As always, we would like to remind our investors that this fund can be extremely volatile and should represent only a small portion of a well-diversified portfolio.