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Dodge & Cox Emerging Markets Stock Fund update

Comments

  • The problem I always run into with emerging market funds is that they invest so much money in countries with unpredictable legal environments for investors.

    China is all about the Communist Party. Russia, and several other countries, seem to be kleptocracies.
  • edited December 2020
    Dodge & Cox rarely opens new mutual funds.
    The firm was founded in 1930 but currently manages only six mutual funds.
  • Regarding quality of markets, IMHO the problem is more the level of enforcement than unpredictable legal environments. An example of the latter might be attempting to remove Section 230 protections from social media companies in order to secure military funding. (I offer this as an example of capriciousness; it is independent of whether changes/removal of Section 230 would be good or bad.)

    Regardless of which types of risks one is concerned about, there are many to choose from in EMs. The SEC Chairman opines that with respect to the plethora of risks, "Passive Investing Strategies Do Not Take Account of These Risks." IMHO this is a good argument for using actively managed funds to the extent that one is interested in EMs.
    https://www.sec.gov/news/public-statement/emerging-market-investments-disclosure-reporting

    Even though the D&C fund will be actively managed, it is important to look at its benchmark. This is because different index providers classify countries differently. If one focuses exclusively on economic criteria ("(1) per capita income, (2) export diversification, and (3) degree of integration into the global financial system"), which is what the IMF does, countries like Taiwan, Greece, and Korea are considered to have developed ("advanced") economies.
    https://www.schroders.com/en/insights/economics/what-it-takes-to-be-promoted-to-emerging-market-status/
    https://etfdb.com/emerging-market-etfs/taiwan-south-korea-and-israel-developed-or-emerging-markets/

    The picture changes when one adds criteria of interest to investors, such as quality of markets and liquidity. AFAIK, Taiwan has never been considered a developed market by any index provider and Greece was demoted by MSCI in 2013 and by FTSE in 2016.
    https://www.msci.com/market-classification
    https://research.ftserussell.com/products/downloads/FTSE_Equity_Country_Classification_Paper.pdf

    Korea is where things get interesting. S&P added it to developed markets in 2001, FTSE 2009. MSCI continues to consider it an emerging market. So if you use a fund like the emerging D&C EM fund (using MSCI criteria) to complement a developed market index fund like VTMGX (based on a FTSE index), you'll wind up "drowning" in Samsung stock (it's #2 in the Vanguard developed market index fund).
    https://www.spglobal.com/en/research-insights/articles/is-south-korea-crowding-your-emerging-markets-allocation
  • edited December 2020
    Update:

    Looks like the offering has been pushed back until January 8.

    https://www.sec.gov/Archives/edgar/data/29440/000168386320015329/f7601d1.htm
  • Right or wrong I hold a position in ADRE simply (mostly) for it's stake in BABA. However I am considering DGS currently.
  • I have been disappointed with Dodge’s international strategy. DODFX has been an average performer for some time. I am skeptical about an EM offering unless they are looking to bring in a new team.
  • metfan said:

    I have been disappointed with Dodge’s international strategy. DODFX has been an average performer for some time. I am skeptical about an EM offering unless they are looking to bring in a new team.

    Yes, compare HGGIX and DODFX, eh?
    I'll be putting a small slug of intermediate-term money into HGGIX this month. I know we are at all-time highs. What else can be said, but "that's a nice problem to have." And "don't fight the Fed."
  • Crash said:


    Yes, compare HGGIX and DODFX, eh?
    I'll be putting a small slug of intermediate-term money into HGGIX this month. I know we are at all-time highs. What else can be said, but "that's a nice problem to have." And "don't fight the Fed."

    Not to defend DODFX’s performance, but you’re comparing apples and bananas here.

    DODFX being Foreign LC Value and HGGIX being Global LC Growth and we all know that Growth and Domestic >>> Value and Foreign for quite some time.

  • @MrRuffles. You are correct.
  • edited January 3
    metfan said:

    I have been disappointed with Dodge’s international strategy. DODFX has been an average performer for some time. I am skeptical about an EM offering unless they are looking to bring in a new team.

    "The following are listed on the filing as managers of the new emerging markets fund: Charles F. Pohl, Diana S. Strandberg, Mario C. DiPrisco, Sophie Chen, Rameez Dossa, and Robert S. Turley.
    Pohl, Strandberg, and DiPrisco are also named managers on the $37.1bn Dodge & Cox International Stock fund (DODFX), which currently has around 6% of its assets in emerging markets."
    Link

  • " ... (DODFX), which currently has around 6% of its assets in emerging markets." Link

    DODFX has always kept a healthy slug of money in EM. As of Sept. 30th, M* reports that of the fund's 98.71% in equities, 16.09% are in emerging markets. That works out to 15.88% of its assets in EM.
    http://portfolios.morningstar.com/fund/summary?t=DODFX&region=usa&culture=en-US

    D&C itself reports as of Sept. 30th that the fund holds 19.8% in EM, counting holdings in Brazil, China, Mexico, Peru, Russia, South Africa, South Korea and Thailand.
    https://dodgeandcox.com/ISF_character.asp

    These two figures can be reconciled simply by deciding whether S. Korea is counted as an EM country (D&C figure) or as a developed market country (M*). The fund's largest holding, at around 4%, is Samsung.

    Where the 6% came from is anybody's guess. (Actually, my guess is that the writer added up the Latin American and African equities, forgetting about Asia and a smidgen in emerging Europe. But that's pure speculation, based on nothing but these numbers adding up to 6%.)
  • That's a good point - I don't know how the author arrived at 6%.
    As you mentioned, the D&C Fact Sheet from September 30 indicates that 19.8% of the fund's assets are allocated to emerging markets. The Semi-Annual Report from June 30 implies that 19.6% of the fund's assets are in emerging markets.

    Asia Pacific (excluding Japan) 12.7%
    Latin America 3.9%
    Africa 2.2%

    add Russia +1.8%
    subtract Hong Kong -1.0%
  • FWIW, according to the prospectus DODFX benchmarks it's performance against the MSCI EM Index which includes Korea. Apparently the FTSE EM Index does not include Korea. The Vanguard ETF (VWO) models itself on the FTSE index.
  • To those who are interested, I checked the Dodge and Cox website. The Emerging Markets Stock Fund is listed and has a link:

    https://www.dodgeandcox.com/EMSF.asp

    Accessing the link, It states the following:

    "We anticipate opening the Dodge & Cox Emerging Markets Stock Fund to investors in May, 2021."
  • Anything to be read into this delay in launch ?
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