The Wasatch Emerging Markets Select Fund underperformed its benchmark by 3.3 points in Q1. An overweight India position and oil spike drove losses, while Chinese internet stocks offset.
Alpha Score of 46 reflects weak overall profile with moderate momentum, poor value, moderate quality, moderate sentiment.
The Wasatch Emerging Markets Select Fund (WAESX) lost 6.48% in the first quarter of 2026, trailing the MSCI Emerging Markets Index by roughly 3.3 percentage points. The fund's managers attributed the decline to the escalation of the Iran conflict and its ripple effects through oil prices and global risk appetite.
The underperformance stemmed largely from the fund's overweight position in Indian equities. Indian markets sold off sharply in late February after oil prices spiked on the Iran escalation. The spike raised fears of higher import costs and wider fiscal deficits. The fund's top Indian holding, a private bank, dropped 12% in the quarter as foreign investors pulled capital from the country's stock market. India imports about 85% of its oil, making it acutely sensitive to crude price jumps. The rupee weakened in tandem, compounding losses for dollar-based investors.
The fund's exposure to Chinese internet companies provided a partial offset. A large e-commerce platform in the portfolio rose 8% in the quarter, helped by stronger-than-expected domestic demand. That gain partially offset the India-driven losses but was not enough to close the gap with the benchmark.
The fund ended the quarter with net cash of about 4%, up from 2% at the start of the year. The managers said they trimmed some positions during the selloff to raise cash. They did not make wholesale changes to the portfolio structure. The quarter's performance was disappointing, the managers said. The long-term investment thesis remained intact. That thesis focuses on companies with strong balance sheets and pricing power in emerging markets.
The Iran conflict's impact on emerging markets is likely to remain a focus in the current quarter. Oil prices have eased from their March highs. They remain elevated. The fund's managers said they are watching for further escalation that could pressure currencies and corporate margins across the developing world. They said they would use the cash to add to positions if the selloff deepened, particularly in stocks where the decline appeared disconnected from underlying business fundamentals.
The fund's annual expense ratio is 1.25%.
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