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Performance Overview
For the third quarter, Columbia Acorn International Select underperformed its primary benchmark, the S&P Developed Ex-U.S. Between $2 Billion and $10 Billion Index, which gained 19.23%. As mentioned last quarter, the fund’s less cyclical portfolio yielded weaker relative performance, as investors had moved back into riskier and more cyclical assets. While the equity markets have begun to discount a V-shaped recovery* with regard to the global economy and corporate profits, evidence of this type of recovery occurring so far has been spotty.
Contributors 1
The fund’s top-dollar contributor to performance was Naspers, a media company with assets in South Africa and other emerging markets. The stock was up 31% in the quarter, due to its underlying strong earnings growth and its stake in rapidly growing Chinese Internet company Tencent. U.K. outsourcing company Serco ended the quarter up 17%. A large portion of Serco’s business comes from government contracts and Serco has benefited, as government entities look for ways to cut costs. Sino Gold, an Australian company that operates gold mines in China, gained 43% in the third quarter on the back of higher gold prices and a takeout by Canadian gold producer Eldorado Gold. Pacific Rubiales Energy, an oil production and exploration company with operating assets in Colombia, gained 45% in the quarter. The stock continues to benefit from the rebound in oil prices, increasing production and new exploration discoveries.
Detractors 1
None of the fund’s weakest-performing stocks detracted too significantly from performance in the third quarter. The worst performers had declines of 5% or less. Seven Bank, a Japanese provider of ATM processing services, fell 5%, as investors searched for more cyclically geared stocks. Potash Corporation of Saskatchewan, a Canadian producer of potash, has been a strong contributor to fund performance in previous quarters but fell 3%, as potash prices weakened. Japan’s Nintendo, a maker of gaming software and hardware, continued to feel the strain of slowing Wii gaming system sales, ending the quarter down 5%. We elected to sell the fund’s position in this stock and recycle the proceeds into faster-growing companies. Capita Group, based in the United Kingdom, provides back office outsourcing services to the public and private sectors. The company is enjoying strong growth, as businesses look for ways to reduce costs through outsourcing, but its stock suffered from a bout of profit taking, falling 1%.
Outlook 1
Given the breadth and magnitude of the challenges out there today, we would expect the volatility recently experienced in most economies and financial markets around the world to continue for some time. If so, we believe we have a portfolio of companies that should, for the most part, weather the challenges ahead. And, should we return to a more stable economic environment, we believe these companies should continue to generate strong earnings growth for shareholders.
Performance data quoted represents past performance, and current performance may be lower or higher. Past performance is no guarantee of future results.
Please read and consider the investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus, which contains this and other important information about the fund, contact your Columbia Management representative or financial advisor or go to www.columbiamanagement.com.
*A V-shaped recovery describes the shape of the market's performance in a recession and the subsequent recovery when graphed. The shape suggests the economy was bad for only the point of the V and then turned quickly higher.
The S&P Developed Ex-U.S. Between $2 Billion and $5 Billion Index is a subset of the broad market selected by the index sponsor representing the mid-cap developed market, excluding the United States.
Unlike mutual funds, indices are not managed and do not incur fees or expenses. It is not possible to invest directly in an index. 1 Determinations of contributors and detractors are based on performance relative to the fund’s benchmark.
Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that the forecasts will come to pass. The views and opinions expressed are those of the portfolio managers and analysts of the affiliated advisors of Columbia Management Group, are subject to change without notice at any time, may not come to pass and may differ from views expressed by other Columbia Management associates or other divisions of Bank of America. These materials are provided for informational purposes only and should not be used or construed as a recommendation of any security or sector.
There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. It should not be assumed that any securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions made in the future will be profitable or will equal the investment performance of the securities discussed herein.
Columbia Management Group, LLC (“Columbia Management”) is the investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and products for institutional and individual investors. Columbia Funds are distributed by Columbia Management Distributors, Inc., member FINRA and SIPC. Columbia Management Distributors, Inc. is part of Columbia Management and an affiliate of Bank of America Corporation.
Wanger Asset Management, L.P. ("CWAM") is a registered investment adviser and an indirect, wholly owned subsidiary of Bank of America Corporation. CWAM is part of Columbia Management. |