Non-North American (EAFE) Equities

European and Asian markets followed a similar path to North American markets with massive declines in the first half followed by a confidence-inspired second half recovery. The Canadian dollar return of the Morgan Stanley Capital Europe, Australasia and Far East (MSCI EAFE) Index for the fiscal year was -11.9%.

Europe had its own examples of financial market failures along with massive job losses, and economic contraction. The European Union was late in joining the U.S. and other countries in dropping short-term interest rates and providing stimulus packages but the impact of those efforts were felt later in the fiscal year.

In Asia, the cyclical nature of many of the economies caused these markets to turn down earlier and their resultant recovery is now more advanced. China’s market began its steep descent in the fall of 2007, bottomed in the fall of 2008, and doubled going into August 2009. Along with other Asian nations, China is growing more rapidly than the rest of the world, and many investors look for this region to continue to lead the world in economic growth for many years to come.

Non-North American equities are managed by two external managers, each representing a fundamentally different investment style from the other. On a combined basis, ATRF’s non-North American portfolios generated a Canadian dollar return of -13.7%, versus -11.9% for the benchmark MSCI EAFE Index.