MONTHLY COMMENT SUSTAINABLE FRONTIER - JANUARY 2026

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POSITIVE START TO THE YEAR

In USD, the fund rose 5.7% (EUR: +4.5%) during the month, compared with MSCI FMxGCC Net TR (USD) which rose 4.4% (EUR: +3.1%), and MSCI EM Net TR (USD) which rose 9.0% (EUR: +7.7%).

Measured in absolute return contribution in USD terms, Egypt contributed positively (+2.3% absolute contribution), Vietnam (+1.5%) and Bangladesh (+1.3%), while the Philippines (-0.2%) and Indonesia (-0.1%) delivered the largest negative contributions. Relative to the index, in USD terms, the overweight in Egypt (+2.3% positive portfolio contribution versus the index), the underweight and stock selection in Vietnam (+1.8%), and the overweight in Bangladesh (+1.3%) contributed the most positively. Our underweight in Romania (-1.5%), underweight in Kazakhstan (-1.2%), and underweight in Slovenia (-0.8%) detracted from relative performance.

Among individual holdings, the largest positive contribution came from the Egyptian bank CIB (5% of the portfolio), which rose 33% during the month amid a strong Egyptian market. The largest negative contribution came from the IT consulting company Systems Ltd (8% of the portfolio), which fell 9% following the strong performance in the previous month.

MARKET COMMENT

The most noteworthy event in February is likely to be the general election in Bangladesh, scheduled for mid-month. The most probable outcome remains a victory for the BNP, historically one of the country’s two dominant parties (alongside the currently banned Awami League). However, a late surge by Jamaat-e-Islami has increased uncertainty. Based on the parties’ manifestos and our discussions with local experts, either winner would be expected to pursue broadly similar economic policies. The key factor is that the election is conducted peacefully and that the result is respected. A victory for Jamaat-e-Islami could, however, in the short-term lead to heightened investor uncertainty. During the month, the Bangladeshi equity market edged higher on expectations of reduced uncertainty following the election.

Throughout the month, considerable attention was also directed towards rising geopolitical tensions. The United States’ apprehension of Venezuela’s president Maduro was followed by sharper rhetoric towards Denmark regarding Greenland. Canada’s Prime Minister Carney delivered what many described as a historic speech in Davos, the central message being that Canada is now diversifying away from the United States, while the European Union concluded a new free trade agreement with India. We are fully convinced that many global leaders have been holding similar discussions over the past seven to eight months, while outwardly maintaining cordial relations with the United States. We have said this before, but it is worth recalling that the United States accounts for less than 30% of the global economy, and this share is expected to decline over time. We remain confident that new leadership in the United States could, in the longer term, repair the damage to the country’s reputation. At the same time, we are equally convinced that a lasting realisation has taken hold regarding the need not to rely excessively on any single counterpart - whether in trade, critical infrastructure, or defence. Increased diversification is likely to benefit companies in the rest of the world and should continue to drive a gradual reallocation away from the United States in financial markets as well. It is reasonable to assume that this diversification will follow a “security ladder”, with the safest and most liquid markets first (Europe and the larger emerging markets), but over time a portion of these flows is also likely to reach frontier markets - arguably the segment of the global economy that is most economically decoupled from developments in the United States.