Global Growth (MSCI World)

Transcription

1 Cumulative Excess Return % Return % Global Growth (MSCI World) Quarterly Review Composite Performance Periods Ending 30 September 2017 At A Glance Inception: 1 January 1999 : MSCI World AUM: $4.37 billion USD Qtr 3 1 Year 3 Year 5 Year 10 Year Global Growth (MSCI World) Gross of Fees MSCI World MSCI World Growth. The value of investments can fluctuate. Data assumes reinvestment of dividends and capital gains. Data reflects past performance. Past performance does not guarantee future results. Periods greater than one year have been annualized. Quarterly Top Relative Contributors and Detractors Contributor Detractor Tencent Holdings Ltd 0.33 Newell Brands Inc Alibaba Group Holding Ltd 0.27 Martin Marietta Materials Inc Kering 0.20 Alliance Data Systems Corp Start Today Co Ltd 0.19 Pioneer Natural Resources Co Keyence Corp 0.14 Ulta Beauty Inc Attribution Analysis One Year Ending 30 September Sector Allocation Security Selection Currency Effect Total Effect

2 Our Growth Equity Philosophy Our time-tested philosophy of growth investing centers on the belief that accelerating growth in earnings and revenues, rather than the absolute level of growth, is more highly correlated to stock price performance. This directs us to research different companies than other growth managers, as we do not require an absolute threshold of earnings or revenue growth, allowing us to take advantage of both the normal price appreciation that -rating of a -to-earnings multiple as the earnings acceleration becomes visible. Goal Seeks to outperform the MSCI World Index by 2% to 3% annualized over a market cycle. Risk Guidelines Maximum position size: 2.5% active weight Regional exposure: +/- 10% of benchmark weight Sector exposure: +/- 5% of benchmark weight Emerging markets exposure: <10% Expected tracking error: 3% to 5% versus benchmark Investment Process 1 2 Fundamental 3 Investment Universe Greater than $3 billion market cap Sufficient trading liquidity Idea Generation Identify companies exhibiting accelerating growth and improving fundamentals Fundamental information flow Quantitative screens Analysis Confirm acceleration is genuine and sustainable Construction Focus portfolio on best ideas Monitor risk controls and guidelines 2,100 Companies 700 Companies Companies Companies 2

3 Characteristics Investment Team Characteristics Weighted Average Market Capitalization $69.8 B $109.9 B Median Market Capitalization $19.5 B $10.2 B Price To Earnings Ratio, Historical 1 Year 28.7x 19.7x Price To Earnings Ratio, Forecasted 1 Year 23.8x 17.6x EPS Growth, Historical 1 Year 23.2% 11.6% EPS Growth, Forecasted 1 Year 22.9% 13.1% Number of Holdings Number of Countries Turnover, Trailing 1 Year 54% N/A % Cash 0.6% 0.0% Forecasts are not a reliable indicator of future performance. Managers - Keith Creveling, CFA - Brent Puff - Ted Harlan, CFA Client Managers - Nathan Chaudoin - Bernard Chua, CFA - Laura Granger, CFA - Jim Shore, CFA 8 Investment Analysts Located in New York Top 10 Holdings Holding Country Industry Assets Alphabet Inc US Internet Software & Services 3.17 Facebook Inc US Internet Software & Services 2.72 Celgene Corp US Biotechnology 2.10 Tencent Holdings Ltd China Internet Software & Services 2.08 Kering France Textiles Apparel & Luxury Goods 1.97 Pioneer Natural Resources Co US Oil, Gas & Consumable Fuels 1.91 Equinix Inc US Equity Real Estate Investment Trusts (REITs) Home Depot Inc/The US Specialty Retail 1.84 Visa Inc US IT Services 1.79 CRH PLC Ireland Construction Materials 1.77 Total 21.25% 1.89 Top 10 Overweights Holding Weight Weight Overweight Tencent Holdings Ltd Kering Pioneer Natural Resources Co Equinix Inc Celgene Corp CRH PLC Facebook Inc Roper Technologies Inc Alphabet Inc Martin Marietta Materials Inc Equity holdings are grouped to include common shares, depository receipts, rights and warrants issued by the same company. holdings subject to change without notice. 3

4 Sector Allocation Weight vs % Sector Information Technology Health Care Financials Consumer Discretionary Real Estate Industrials Energy Materials Consumer Staples Telecommunication Services Utilities Quarterly Sector Performance Contribution to Return vs Sector Contribution to Return Contribution to Return Information Technology Financials Consumer Staples Health Care Real Estate Industrials Consumer Discretionary Utilities Telecommunication Services Energy Materials % When shown, "Diversified" includes portfolio holdings that cannot be attributed to a specific GICS sector. 4

5 Country Allocation: Top 10 Over/Underweights Weight vs Country United States China France Brazil Hong Kong Ireland India Portugal Indonesia Austria Singapore Italy Sweden Spain Switzerland Australia United Kingdom Germany Japan Canada % Quarterly Top Relative Contributors and Detractors by Country Contributor China 0.60 Japan 0.37 United Kingdom 0.21 France 0.18 Brazil 0.14 Detractor Germany Canada Denmark Italy Portugal

6 Percentile Rank Global Growth (MSCI World) Risk-Adjusted Performance Three-Year Risk-Adjusted Performance vs. ea Global Large Cap Equity Universe vs. MSCI World-ND, Citigroup 3-Month T-Bill 0 Excess Returns Tracking Error Information Ratio Sharpe Ratio 25 Median Global Growth (MSCI World) Excess Returns Tracking Error Information Ratio Sharpe Ratio Manager Percentile Rank Median Source: evestment Analytics Excess returns are gross of fees. Number of products in the universe was 378. Available Vehicles Separate Account Available in U.S. and certain non-u.s. countries 6

7 Quarterly Commentary Review Synchronized global growth continues. Global equity performance remained strong, supported by improving corporate earnings and strengthening macroeconomic data. Emerging markets improving. Economic and business fundamentals in many emerging markets continue to improve, benefiting from the cyclical upswing in global economic activity, including gains in manufacturing and trade. Digital shift driving information technology. The ongoing trend from offline to online platforms drove performance for Tencent Holdings and Alibaba Group Holding. Both companies reported improving corporate revenue and earnings. Each dominates its respective categories. Financials and consumer staples contribute. B3 (Brasil Bolsa Balcao) was a key contributor among financials. The financial exchange reported rising revenue growth and has benefited from the integration of CETIP, a rival clearinghouse acquired in the first quarter. In consumer staples we avoided laggards such as tobacco and food companies. Weather-related weakness hurts materials. Materials holdings weighed on relative performance. Aggregates and building materials company Martin Marietta Materials reported disappointing quarterly earnings after near-record rainfall and two major hurricanes in the U.S. However, construction activity and fiscal spending on public infrastructure should support future growth. More drug research and development supports medical devices and equipment companies. We have reduced the increased our holdings in makers of medical devices and equipment. This included adding life sciences company Bio- Rad Laboratories. U.S. technology holdings featured. North America holdings include large companies that are domiciled in the U.S. but operate on a global scale. Examples include social networking giant Facebook and Alphabet, parent of search engine Google. Key Contributors Tencent Holdings. Shares in the internet company rose after management reported better-than-expected revenue and earnings growth, driven by strength in online gaming and online advertising. The company has also been realizing success in its cloud and payments businesses. Alibaba Group Holding. The China-based e-commerce company reported revenue and earnings growth that exceeded consensus estimates, while margins expanded. Alibaba continues to dominate online retailing in China. Kering. Shares in the luxury goods company continued to rise on the back of a successful product and store restructuring initiative for its core Gucci brand. Sales growth for stores in existence for at least a year, have accelerated. We believe that the improving trends at Kering remain sustainable. Key Detractors Newell Brands. The consumer goods company declined on news that second-quarter results missed margin targets. Nevertheless, the company reiterated its guidance on fullyear sales and earnings. We remain confident that Newell will drive earnings growth with product innovation and cost synergies from its Jarden acquisition. Martin Marietta Materials. The aggregates and building materials company reported disappointing quarterly earnings due to near-record rainfall in the Southeastern U.S. and two hurricanes. However, we believe residential/nonresidential construction activity and fiscal spending on public infrastructure remain supportive of future growth. Alliance Data Systems. The data-driven marketing and loyalty program provider announced second-quarter for Our long-term investment thesis remains intact. Notable Trades Lonza Group. We invested in this chemicals and biotechnology company due to our belief that its recent purchase of Capsugel revenue performance and improve profitability. Lonza is well positioned to benefit from the proliferation of biologic and complex drug development and commercialization. RPC Group. We initiated a position in this packaging company due to our belief that earnings and free cash are at a positive inflection point as RPC moderates its pace of acquisitions and focuses on operational excellence. In our view, growth is sustainable given industry fragmentation Allergan. Shares in the drugmaker traded lower following disappointing second-quarter results. We fully exited the growth will be challenged by increased competition and rising costs. 7

8 Comerica. We liquidated our position in Comerica, as loan growth volume at the financial services company has been below our expectations. We believe there is more favorable risk/reward across other regional bank names in the portfolio. Positioning for the Future The portfolio continues to invest in companies where fundamentals are strong and improving but share price performance does not fully reflect these factors. Our process is based on individual security selection, but broad themes have emerged. Secular shift driving information technology. The secular shift to online platforms and e-commerce has led to an overweight in information technology. Holdings such as Tencent Holdings, which continues to outperform on strong and growing earnings results, and Alibaba Group Holding, where outperformance is being driven by better-thanexpected revenue and earnings growth, are examples of this trend. Rotating from drugs to medical devices and equipment. Within health care, we reduced exposure to pharmaceuticals companies and increased investments in medical device, equipment, and technology companies benefiting from increased research and development spending by end customers. We added a position in Bio- Rad Laboratories, a life sciences company that should benefit from margin expansion as it executes on initiatives expected to boost profitability. Improving economic activity supporting financials. We own select emerging markets banks positioned to sustain growth given a combination of low credit penetration and improving economic activity, nonbank financial companies providing mission-critical data and analytics, and U.S. regional banks expected to benefit from a gradual rise in U.S. interest rate policy. During the quarter, we initiated positions in U.S. regional bank Webster Financial and Perubased Credicorp, and added to Hong Kong-based continues to accelerate, with a subsequent increase in profitability. Despite concerns about potential Chinese regulation on capital, company fundamentals remain intact. Lack of growth opportunities in utilities. The portfolio has no exposure in the utilities sector, where we have not seen examples of companies exhibiting accelerating, sustainable growth that fit our investment process. Improving Japan presents opportunities. While we remain underweight Asia, we added exposure to the region during the quarter. We increased positions in companies poised to take advantage of improvements in economic activity in Japan, particularly in domestic consumption, including e- commerce and internet firm Rakuten and cosmetics maker Pola Orbis Holdings. 8

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Sector weights, portfolio characteristics and holdings are of a representative account in the composite. Holdings are current as of the date indicated, are subject to change and may not reflect the portfolio's current holdings. construction guidelines document operational policies and not necessarily investment restrictions imposed on management of the strategy. Material presented has been derived from industry sources considered to be reliable, but their accuracy and completeness cannot be guaranteed. Opinions expressed are those of the portfolio investment team and are no guarantee of the future performance of any portfolio. Nothing in this document should be construed as offering investment advice. Please note that this is for informational purposes only and does not take into account whether an investment is suitable or appropriate for a specific investor. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. For purposes of compliance with the Global Investment Performance Standards (GIPS with the Global Investment Performance Standards (GIPS ). Global Growth (MSCI World) composite includes portfolios that invest in the equity of large capitalization companies in developed markets including the United States that are demonstrating improving growth rates. Index futures (and currency forwards and futures, where applicable or appropriate) are occasionally used to equitize cash and manage portfolio risk. Other derivative instruments may be used, as allowed, as part of the investment strategy. Returns are calculated and stated in U.S. dollars. 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