Oakmark Global Select Fund - Investor Class
Average Annual Total Returns 03/31/16
Since Inception 10/02/06 7.15%
10-year N/A
5-year 8.33%
1-year -4.36%
3-month -3.82%
Expense Ratio as of 09/30/15 was 1.13%
Past performance is no guarantee of future results. The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. The investment return and principal value vary so that an investor’s shares when redeemed may be worth more or less than the original cost. To obtain the most recent month-end performance data, view it here.
The Oakmark Global Select Fund declined 4% for the quarter ended March 31, 2016, underperforming the MSCI World Index, which was flat for the quarter. The Fund has returned an average of 7% per year since its inception in October 2006, outperforming the MSCI World Index’s annualized gain of 4% over the same period.
The largest contributor to performance for the quarter was Oracle (U.S.), which returned 12%. Shares reacted positively to stronger-than-expected fiscal third quarter results from the cloud-based business. We believe Oracle’s successful transition to the cloud indicates that the company is on the right track. Management also recently announced a $10 billion increase to Oracle’s existing share repurchase program. Even though its stock has enjoyed recent price increases, we believe Oracle remains undervalued relative to its normalized earnings power.
Credit Suisse (Switzerland) was the largest detractor for the quarter, declining by 34%. Although CEO Tidjane Thiam warned that fourth-quarter earnings would be weak, some one-off expenses related to litigation, pension true-up charges and write-downs on certain credit assets were negative surprises during the period. However, this has caused the management team to accelerate the restructuring and reduction of non-core investment banking lines of businesses. The goal is to emphasize the wealth management business that has very good secular growth trends, is fee based and requires little capital. We believe Credit Suisse’s capital position remains solid with a Tier 1 capital ratio of 11.4% as of year-end, which is in excess of regulators’ 10% requirement. Despite some near-term challenges, we continue to believe that over time shareholders will benefit from CEO Thiam’s initiatives to correct some legacy missteps, grow the business and reduce costs.
We did not add or remove any names from the Fund during the quarter. Geographically, 45% of the Fund’s holdings were invested in U.S.-domiciled companies as of quarter end while approximately 45% were allocated to equities in Europe, 5% in South Korea and 5% in Japan.
We continue to believe some global currencies are overvalued relative to the U.S. dollar. As a result, we defensively hedged a portion of the Fund’s currency exposure. Approximately 26% of the Swiss franc exposure was hedged at quarter end.
We would like to thank our shareholders for continuing to support us and our value investing philosophy.
The holdings mentioned above comprise the following percentages of the Oakmark Global Select Fund’s total net assets as of 03/31/16: Oracle Corp. 4.7% and Credit Suisse Group 5.0%. Portfolio holdings are subject to change without notice and are not intended as recommendations of individual stocks.
Click here to access the full list of holdings for The Oakmark Global Select Fund as of the most recent quarter-end.
The MSCI World Index (Net) is a free float-adjusted market capitalization weighted index that is designed to measure the global equity market performance of developed markets. This benchmark calculates reinvested dividends net of withholding taxes using Luxembourg tax rates. This index is unmanaged and investors cannot invest directly in this index.
Because the Oakmark Global Select Fund is non-diversified, the performance of each holding will have a greater impact on the Fund’s total return, and may make the Fund’s returns more volatile than a more diversified fund.
The percentages of hedge exposure for each foreign currency are calculated by dividing the market value of all same-currency forward contracts by the market value of the underlying equity exposure to that currency.
Investing in foreign securities presents risks that in some ways may be greater than U.S. investments. Those risks include: currency fluctuation; different regulation, accounting standards, trading practices and levels of available information; generally higher transaction costs; and political risks.
The discussion of the Fund’s investments and investment strategy (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) represents the Fund’s investments and the views of the portfolio managers and Harris Associates L.P., the Fund’s investment adviser, at the time of this letter, and are subject to change without notice.
