State Street Major Market Portfolio Review Dec. 2009


Tracking the portfolio of the State Street Global Advantage Major Market Fund is one way to track global investing value.

State Street is one of the world’s largest fund managers.  Keppler Asset Management, a leader in analyzing market value, selects good value major markets.  State Street then selects good value shares in these markets.

The State Street Global Advantage Funds are only available to non US investors, but all of us can gain insights by studying the portfolio breakdown of these funds.   Non US investors can invest in the funds.

US investors can recreate the portfolio by buying the shares in equal proportions.

The current breakdown of invested countries (December 2008) of the State Street Global Advantage Major Market Fund is:

Countries  Percent of Portfolio
US                       9.8%
UK                    10.2%
Spain                  9.6%
Singapore         10.3%
Norway               8.3%
Italy                   9.5%
Germany            9.8%
France                9.8%
Belgium              9.8%
Austria                9.3%
Cash                   1.5%
Other                  2.6%

Top 10 Investments

Name                                                     Country                                Sector

Berkshire Hathaway Inc.                               US                      Value Conglomerate
Statoil ASA                                               Norway                                  Oil
Telefonica S.A.                                         Spain                      Telecommunications
ENI S.p.A.                                                 Italy                                       Oil
Delhaize Group                                        Belgian                             Food Retail
BP p.l.c.                                                    Britain                                   Oil
Banco Santander Central Hispano S.A.      Spanish                              Banking
E. ON AG                                                  German                              Electricty
Erste Group Bank AG                                Austrian                             Banking
Enel SpA                                                   Italy                                   Electricity

All the shares above can be purchased on their local stock exchange or the New York Stock Exchange so both non US and US investors can invest in them via Jyske Bank or Jyske Global Asset Mangement.

You can gain details from:

US investors Thomas Fischer at fischer@jgam.com

Non US investors Rene Mathys at mathys@jbpb.dk

By comparing annual performance of the State Global Advantage Major Market Fund (MMHF) to the Morgan Stanley Capital Index Global Stock Index (MSCI) how we can see how the good value approach consistently outperforms the global average…plus volatility has been lower.

State Global Advantage Major Market Fund Performance IN EURO

Year           2003       2004      2005      2006       2007      YTD
MMHF      17.38%    16.74%   27.50%   21.56%     2.08%  -40.74%
MSCI        10.74%      6.46%   26.17%     7.40%   -1.66%  -33.81%

We can also note that value investments tend to drop more during bear markets. This makes sense. Value investors will be buying shares of companies where the price has dropped enough to create extra value.  No one can predict when markets will turn.   Value investors will tend to buy on the way down…thus making short term performance worse than the norm.  Value investing is long term investing. Value investing is the most dependable type of investing but not in the short term.

We can see how a large downturn can turn total per annum results upside down in the shorter term.  Though the State Global Advantage Major Market Fund outperformed the MSCI every year, 2003 to 2007, the 2008 downturn created a portfolio that requires five year performance for the fund to outperform the market whole.

State Global Advantage Major Market Fund  Total Return Per Year

Time                 Inception  5 years   3 years    1 year     3 months
MMHV                  6.59%    2.26%     -8.72%    -41.28%     -25.35%
MSCI                    4.31%   -1.06%    -10.61%   -34.41%     -22.52%

We can see this phenomenon even at Berkshire Hathaway, the legendary value fund.

Berkshire Hathaway Performance

Period        Actual(%)    vs. S&P 500 (%)    Rank In Industry    Industry Rank
4 Week       – 6.15               0.10                       62                       39
13 Week    -10.04             -3.55                       51                        47
26 Week    -11.17             -3.05                       56                        83
52 Week        6.03             27.52                       92                        41
YTD           -16.14             -3.32                       51                        91

Rank is a percentile that ranges from 0 to 99, with 99 and shows that Berkshire Hathaway which has been the best value fund have been among the worst in a sector (value conglomerates) that has been under performing the market as a whole.

Please send your questions and comments to me at gary@garyascott.com

Be sure to put MC in the subject line so I can give you a priority reply.

Until next message may all your value be good.

Gary

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