Seafarer®

Pursuing Lasting Progress in Emerging Markets®

Seafarer Overseas Growth and Income Fund

Overview

Investment Objective

The Fund seeks to provide long-term capital appreciation along with some current income; it also seeks to mitigate adverse volatility in returns.

Strategy

The Fund invests primarily in the securities of companies located in developing countries. The Fund invests in several asset classes including dividend-paying common stocks, preferred stocks, and fixed-income securities.

The Fund seeks to offer investors a relatively stable means of participating in developing countries’ growth prospects, while attempting to mitigate adverse volatility in returns. 

Portfolio Components

The Fund utilizes bottom-up security selection to construct a portfolio that offers a broad balance between prospective growth and current cash flow, the latter manifest to shareholders in a current dividend yield. When balancing the tradeoff between growth and income, the Fund seeks a wide range of securities across three portfolio components, as defined below.

Core Holdings Moderately underappreciated growth Typically moderately elevated current yield
Selected Growth Holdings Higher growth potential Typically lower current yield; sometimes no yield (dividend policy not yet established)
Value Holdings Lower growth potential Typically higher current yield; sometimes no yield (dividends canceled under financial stress)

Fund Characteristics

Inception Date
Net Assets
Active Share vs Index
Portfolio Turnover
12-month period ended
12-month period ended
Distribution Frequency
Status SIGIX is open; SFGIX is closed to most new investors
Benchmarks
MSCI Emerging Markets Total Return USD Index
Morningstar Emerging Markets Net Return USD Index

Portfolio Management

Andrew Foster Lead Manager
Paul Espinosa Lead Manager
Kate Jaquet Co-Manager

Ownership of Fund Securities

Share Classes

Investor Institutional
Ticker SFGIX SIGIX
CUSIP
NAV
30-Day SEC Yield
Fund Distribution Yield
Gross Expense Ratio1
Load
12b-1 Fee
Minimum Initial Investment – Regular Account
Minimum Initial Investment – Automatic Investment Plan2
Minimum Initial Investment – Retirement Account
Minimum Subsequent Investment

Underlying Portfolio Holdings

Holdings3
Unique Corporate Issuers4
% of Net Assets in Top 10 Holdings
Weighted Average Market Cap
Market Cap of Portfolio Median Dollar
Gross Portfolio Yield5
Price / Book Value5
Price / Earnings56
Earnings Per Share Growth56
   
The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. View the Fund’s most recent month-end performance.

Geographic Focus

Developing countries including, but not limited to:

Africa Botswana, Ghana, Kenya, Mauritius, Morocco, Nigeria, Tunisia, South Africa, Zimbabwe
East and South Asia Bangladesh, China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Sri Lanka, Taiwan, Thailand, Vietnam
Emerging Europe Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Greece, Hungary, Lithuania, Kazakhstan, Poland, Romania, Russia, Serbia, Slovenia, Turkey, Ukraine
Latin America Argentina, Brazil, Chile, Colombia, Jamaica, Mexico, Peru, Trinidad and Tobago
Middle East Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, United Arab Emirates

Select developed countries with significant economic and financial linkages to developing countries, including Australia, Hong Kong, Ireland, Israel, Japan, New Zealand, Singapore, and United Kingdom.

Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.
Portfolio holdings are subject to change.
  1. Seafarer Capital Partners, LLC has agreed contractually to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver / Expense Reimbursements (inclusive of acquired fund fees and expenses, and exclusive of brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.15% and 1.05% of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through August 31, 2021.
  2. Shareholders who sign up for an Automatic Investment Plan can request a waiver of the Institutional Class investment minimum. View the waiver program criteria.
  3. Excludes short-term government bonds; includes medium- and long-term government bonds.
  4. Excludes all government bonds.
  5. Calculated as a harmonic average of the underlying portfolio holdings.
  6. Based on consensus earnings estimates for next year. Excludes securities for which consensus earnings estimates are not available.

Performance

Total Returns

As of (Prior Month)

NAV / Index Level () Annualized Cumulative Inception Date Net Expense Ratio1 Gross Expense Ratio1
YTD 1 Mo 3 Mo 1 Yr 3 Yr 5 Yr 7 Yr Since Inception Since Inception

As of (Prior Quarter)

NAV / Index Level () Annualized Cumulative Inception Date Net Expense Ratio1 Gross Expense Ratio1
YTD 1 Mo 3 Mo 1 Yr 3 Yr 5 Yr 7 Yr Since Inception Since Inception
Growth of a $10,000 Investment Since Inception
The rates of return are hypothetical and do not represent the returns of any particular investment.
All performance is measured in U.S. dollar terms. For the MSCI index, performance is calculated to reflect the reinvestment of dividends, capital gains, and other corporate actions gross of foreign jurisdiction withholding taxes (i.e., such taxes are ignored).  For the Morningstar index, performance is calculated to reflect the reinvestment of dividends, capital gains, and other corporate actions net of foreign jurisdiction withholding taxes. The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost.
Source: ALPS Fund Services, Inc.

Return Characteristics as of

Relative to the MSCI Emerging Markets Total Return Index except where noted.

3 years Since Inception2
Alpha
Beta
R-squared
R-squared vs. S&P 500 Index
Upside Capture Ratio
Downside Capture Ratio
Source: Morningstar.
  1. Seafarer Capital Partners, LLC has agreed contractually to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver / Expense Reimbursements (inclusive of acquired fund fees and expenses, and exclusive of brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.15% and 1.05% of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through August 31, 2021.
  2. As of 3/1/12.  The Fund’s inception date is 2/15/12 but Morningstar data is only available as of the beginning of the following month.
The Seafarer Overseas Growth and Income Fund is not sponsored, endorsed, sold, or promoted by Morningstar, Inc. Morningstar, Inc. makes no representation or warranty, express or implied, to the shareholders of the Fund or any member of the public regarding the advisability of investing in the Fund or the ability of the Morningstar Emerging Markets Net Return U.S. Dollar Index to track general equity market performance of emerging markets.

Composition

Top 10 Holdings as of

Holding Sector Country Portfolio Component1 Issuer Mkt Cap ($B) Yield2 Price/ Book Price/ Earnings3 EPS Growth3
Portfolio holdings are subject to change.
Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.

View all Holdings

Portfolio Composition by Region as of

All Holdings ADRs, Common & Preferred Equities Only
% Net Assets Price / Earnings67 EPS Growth67
Region # of Holdings4 Fund +/− vs. Index Avg Mkt Cap ($B) Gross Yield6 Price / Book6 Prior Year This Year Next Year This Year Next Year
Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.

Portfolio Composition by Sector as of

All Holdings ADRs, Common & Preferred Equities Only
% Net Assets Price / Earnings67 EPS Growth67
Sector # of Holdings4 Fund +/− vs. Index Avg Mkt Cap ($B) Gross Yield6 Price / Book6 Prior Year This Year Next Year This Year Next Year
Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.
30-Day SEC Yield: SFGIX ; SIGIX ()
The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. View the Fund’s most recent month-end performance.

Portfolio Composition by Component as of

Portfolio Component1 % Net Assets
Source: Seafarer.

Portfolio Composition by Asset Class as of

Asset Class % Net Assets
Source: ALPS Fund Services, Inc.

Portfolio Composition by Market Capitalization as of

Market Capitalization % Net Assets +/− vs. Index
Sources: ALPS Fund Services, Inc., Seafarer.
Due to rounding, percentage values may not sum to 100%. Values less than 0.5% may be rounded to 0%.
  1. Core Holdings: moderately underappreciated growth; typically moderately elevated current yield. Growth Holdings: higher growth potential; typically lower current yield; sometimes no yield (dividend policy not yet established). Value Holdings: lower growth potential; typically higher current yield; sometimes no yield (dividends canceled under financial stress).
  2. Yield = dividend yield for common and preferred stocks and yield to maturity for bonds.
  3. Based on consensus earnings estimates for next year.
  4. Excludes short-term government bonds; includes medium- and long-term government bonds.
  5. Excludes all government bonds.
  6. Calculated as a harmonic average of the underlying portfolio holdings.
  7. Based on consensus earnings estimates. Excludes securities for which consensus earnings estimates are not available.

Distributions

For More Information

Individual Investors

(855) 732-9220 (Mon–Fri 9am–8pm ET)
seafarerfunds@alpsinc.com

Investment Professionals

(415) 578-5809 (Mon–Fri 9am–8pm ET)
clientservices@seafarerfunds.com

Mid-year 2021 Distribution Estimates

Please note that these estimates are subject to change.1

Record Date Ex, Pay and Reinvest Date Ordinary Income Short Term Capital Gains Long Term Capital Gains Total Distrib. Per Share
SFGIX (Investor Class) 6/23/21 6/24/21 $0.123 $0.000 $0.000 $0.123
SIGIX (Institutional Class) 6/23/21 6/24/21 $0.126 $0.000 $0.000 $0.126

Actual distribution amounts will be available on this page on or after the ex-date.

All shareholders of record on June 23, 2021 will receive the mid-year distribution. On June 24, 2021 the share price of the Fund will be reduced by the amount of the distribution (net of any market performance), and the distribution will either be paid or reinvested as of market close (per the shareholder’s previously established account settings).

The estimates shown above should not be used in the computation of federal or state income taxes.

  1. Estimates are based on Fund shares outstanding as of May 13, 2021.

2021 Distribution Dates

Distribution frequency: Semi-annual

Please note: future dates are subject to change.

Record Date Ex, Pay and Reinvest Date
Mid-year Distribution 6/23/21 6/24/21
Year-end Distribution 12/08/21 12/09/21

To be notified of distribution estimates, sign up for Seafarer email updates.

Historical Distributions

Ex, Pay and Reinvest Date Reinvest NAV Ordinary Income Short Term Capital Gains Long Term Capital Gains Total Distrib. Per Share Cumulative Distrib. Per Share Since Inception
SFGIX (Investor Class)
SIGIX (Institutional Class)

For more information on the Fund’s distribution policies, please see the “Dividends and Distributions” section of the Prospectus.

Foreign Source Income

The Seafarer Overseas Growth and Income Fund has elected to pass through to shareholders the foreign taxes paid on income earned from foreign investments. These foreign taxes are reported in Box 7 of Form 1099-DIV. As a shareholder in the Fund, you may be able to claim a tax credit or an itemized deduction on your federal tax return for the amount of taxes paid to foreign countries. Please consult your tax adviser.

Year Foreign Source Income (as a % of Box 1a on Form 1099-DIV)
Past performance is no guarantee of future results. There is no guarantee that the Fund will pay or continue to pay distributions.

Portfolio Review

Seafarer Overseas Growth and Income Fund

Portfolio ReviewFirst Quarter 2021

During the first quarter of 2021, the Seafarer Overseas Growth and Income Fund returned 3.06%.1 The Fund’s benchmark indices, the MSCI Emerging Markets Total Return USD Index and the Morningstar Emerging Markets Net Return USD Index, returned 2.34% and 2.53%, respectively. By way of broader comparison, the S&P 500 Index returned 6.18%.

The Fund began the quarter with a net asset value of $14.71 per share. It paid no distributions during the quarter and finished the period with a value of $15.16 per share.2

Performance

During the first quarter of 2021, the sharp swings in stock prices were some of the most volatile in recent memory, save perhaps for the most extreme moments of the 2008 financial crisis, and perhaps some of the darkest days of March 2020, when financial markets collapsed in a panic over the progression of COVID-19.

Stocks in the developing world rose at a furious pace in the first weeks of January, led by some of the most expensive stocks in the MSCI Emerging Markets Index – comprised mostly of China internet and media stocks, China health care and pharmaceutical stocks, and Taiwan technology companies. By the 25th of January, the index had surged 9.2% year-to-date. The index’s two largest holdings – internet giant Tencent, and semiconductor leader Taiwan Semiconductor (TSMC) – jumped 35.9% and 19.9% in U.S. dollar terms, respectively, during the same period.3

The gains in these two widely-owned stocks were remarkable when measured in percentage terms, but absolutely breathtaking when viewed in terms of market capitalization: the two companies added an astonishing $435 billion dollars of combined market value during those 25 calendar days.3 Certainly, both Tencent and TSMC enjoyed strong corporate performance during 2020, so one might intuit that such increases were somehow justified. Yet for the most part, the “news” that drove these stocks to highest-ever prices was already well-known and well-circulated prior to the end of 2020, and thus the rapid gains over those 25 days were evidence of wild “momentum,” and not reflective of fundamental changes or events.

Not much later, it all came crashing down. First, the index wobbled a bit in late January, but then it climbed to new heights by mid-February: by February 17th, the index climbed 12% year-to-date. But the rapid advance did not persist: heightened regulatory action in China’s internet sector, economic uncertainty arising from the pandemic, and somewhat weaker-than-expected profitability during the final quarter of 2020 (but not formally reported until February and March of 2021) all conspired to send the index tumbling. China’s stock markets, which had been at the forefront of gains, tumbled sharply, and contributed the most to the index’s ensuing decline. The benchmark limped to a gain of just over 2% for the quarter, and investors were left whipsawed.

Amid this extreme volatility, the Growth and Income Fund proved relatively stable: it edged ahead of the index in the first days of January, only to be rapidly eclipsed by the surging benchmark in mid-February; but during the ensuing decline, the Fund held up better than the plummeting index. The Fund finished the quarter with a gain of just over 3%.

As with the benchmark, some of the Fund’s biggest contributions came from its holdings in Asian internet and digital media stocks. While the index profited primarily from its position in the behemoth Tencent, the Fund’s contributors were Naver (a search and e-commerce company based in South Korea) and China Literature (a digital publisher and literary content platform, whose largest shareholder is – ironically – Tencent). The Fund’s contributions were otherwise more diversified than those of the index, with notable returns from Richter Gedeon (a Hungary-based global pharmaceutical company), Pacific Basin (a near-shore shipping company focused on the Eastern seaboard of China), and Jardine Matheson (a storied holding company with assets that span properties, hotels, grocery and retail, automotives, heavy equipment, mines and palm plantations across East and Southeast Asia).

However, the Fund’s exposure to Latin America fared poorly, as Brazil and other nations struggle to manage the pandemic. The Fund saw some of its biggest declines in Itaú Unibanco (a Brazil-based diversified financial services company) and Crédito Real (a specialized finance company in Mexico). Several Asia-based companies weighed on performance, too: Accton (a Taiwan maker of network equipment), Coway (a South Korea consumer appliance company) and Samsung C&T (a South Korea holding company and construction business).

Allocation

During the quarter, the Fund undertook three allocative changes: one deletion and two new issuers.

The Fund exited Taiwan Semiconductor Manufacturing Company early in the quarter. The company is the world’s largest and most profitable “semiconductor foundry,” which means that it makes semiconductors on behalf of global “design firms” – clients that only design and market chips, but which do not manufacture them. Prior to its sale, TSMC was the longest-held position within the Fund, and consistently one of the largest over the past decade. It is an exceptionally well-managed company, with strong cash flow and a favorable dividend policy. Our decision to exit the stock was driven by the company’s outsized growth in capital expenditures – capital expenditures that at the margin seem to be driven as much by political forces as actual, legitimate customer demand. We are concerned those rising capital expenditures might consume most all of the company’s free cash flow, rendering it unable to pay its historic dividend, or possibly forcing it to incur debt (which it has avoided in the past). As China races to install quasi-nationalized “foundry” capacity of its own, and as TSMC still faces rivalry from other competitors such as Samsung Electronics (a Fund holding), the risk that the industry might suffer a glut of oversupply is rising, even as demand seems insatiable at present. TSMC’s valuation has never been higher and in our view does not seem to account for such risks.

The Fund purchased stakes in two new issuers in South Korea: Samsung C&T, a holding company of the Samsung Group, with substantial interests in Samsung Electronics, and other group assets; and a healthcare company that will be discussed in next quarter’s portfolio review.

Outlook

The outlook for the developing world is a complicated one. The emerging market asset class is bifurcated along geographical lines: exactly three countries – China, South Korea and Taiwan – have, for all practical purposes, exited the pandemic due to strong protocols and risk controls. Their economies have been functioning normally for the past several quarters. These three nations have seen their stock markets soar from such success, with valuations that have priced in recovery, and possibly more (as noted in the Fund’s fourth quarter 2020 portfolio review, portions of China’s markets are experiencing a financial bubble).

Meanwhile, most all of the remaining emerging markets are mired in the pandemic – some deeply so – with human and economic tolls that continue to grow. For most developing nations, “normalization” is nowhere on the horizon in 2021. Sadly, highly-populated countries such as India and Brazil appear to have mismanaged protocols worst of all, and both are struggling to administer the vaccine in sufficient numbers, and as a consequence, COVID-19 now runs amok. It may be years yet before those two nations and some others control the virus within their borders. We watch these nations’ struggles and losses of life with sadness, and we hope for a miracle, but the situation appears grim.

The forecast for corporate performance is also bifurcated along geographical lines. The aforementioned “normalized” countries (China, South Korea, Taiwan) are forecast to see corporate profits grow 23%, 64% and 20%, respectively, in 2021. Such rates of growth are quite high, but they reflect a warranted recovery from lower levels seen in 2020. Yet it might surprise you to learn that these rates are pedestrian when compared to the rates forecast for many other nations within the emerging market asset class, such as Brazil (137%), Mexico (126%), Russia (114%), India (32%), and even Peru (705%).4

These elevated forecasts from the latter group have one element in common: they are predicated on a reflexive assumption of “normalization” in economic and corporate performance for most countries during 2021. Together, these forecasts undergird an astonishing expectation for growth of 45% from the constituents of the MSCI Emerging Markets Index this year.4 Yet as noted above, “normalization” will not occur during 2021 for the majority of the developing world. Thus the 45% forecast appears rooted in wildly misplaced expectations – yes, China, South Korea and Taiwan have normalized, but the rest have not, and will not anytime soon. Unsurprisingly, but as usual, professional analysts are over-optimistic; and this time, their forecasts appear wildly out of touch with a terrible reality.

We do think the emerging markets will see profit growth this year, given the pandemic-induced nadir of 2020. It is possible that the benchmark’s constituents will collectively produce profit growth between 20% and 27.5%, and at this time we expect the Fund’s holdings will perform within a similar range. Still, we would encourage investors to approach the asset class with a strong degree of caution, and to disbelieve the hype over recovery and normalization. As usual, the truth is far more complicated – in this case, the asset class is bifurcated between nations mired in pandemic, and those that have moved beyond.

Thank you for entrusting us with your capital. We are honored to serve as your investment adviser in the emerging markets.

Andrew Foster,
Paul Espinosa,
The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. View the Fund’s most recent month-end performance.
The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect Seafarer’s current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Seafarer does not accept any liability for losses either direct or consequential caused by the use of this information.
As of March 31, 2021, Naver Corp. comprised 1.3% of the Seafarer Overseas Growth and Income Fund, China Literature, Ltd. comprised 4.3% of the Fund, Richter Gedeon Nyrt comprised 3.7% of the Fund, Pacific Basin Shipping, Ltd. comprised 1.6% of the Fund, Jardine Matheson Holdings, Ltd. comprised 2.2% of the Fund, Itaú Unibanco Holding SA comprised 2.6% of the Fund, Credito Real SAB de CV SOFOM ER comprised 0.2% of the Fund, Accton Technology Corp. comprised 2.7% of the Fund, Coway Co., Ltd. comprised 3.0% of the Fund, Samsung C&T Corp. comprised 2.9% of the Fund, Samsung C&T Corp., Pfd. comprised 0.4% of the Fund, and Samsung Electronics Co., Ltd., Pfd. comprised 4.5% of the Fund. The Fund did not own shares in Tencent Holdings, Ltd. or Taiwan Semiconductor Manufacturing Co., Ltd. View the Fund’s Top 10 Holdings. Holdings are subject to change.
The Seafarer Overseas Growth and Income Fund is not sponsored, endorsed, sold, or promoted by Morningstar, Inc. Morningstar, Inc. makes no representation or warranty, express or implied, to the shareholders of the Fund or any member of the public regarding the advisability of investing in the Fund or the ability of the Morningstar Emerging Markets Net Return U.S. Dollar Index to track general equity market performance of emerging markets.
  1. References to the “Fund” pertain to the Fund’s Institutional share class (ticker: SIGIX). The Investor share class (ticker: SFGIX) returned 3.07% during the quarter.
  2. The Fund’s Investor share class began the quarter with a net asset value of $14.64 per share; and it finished the quarter with a value of $15.09 per share.
  3. Source: Bloomberg.
  4. Source: J.P. Morgan, “Emerging Markets Equity Strategy Steering Board,” 1 April 2021.