Institutional Strategies

Emerging Markets Equity

A high-conviction portfolio that utilizes top-down analysis of macroeconomic and thematic factors to identify key countries and sectors for growth, supported by fundamental research to drive security selections. As an active manager, we believe the inefficient nature of emerging markets provides us the opportunity to find companies offering attractive risk/return potential and the ability to outperform relative to our benchmark index.

Investment Philosophy

As an active manager, we believe the inefficient nature of emerging markets provides us the opportunity to outperform relative to our benchmark index. The following statements shape our investment philosophy:

  • Our top-down viewpoint and subsequent country allocation is a crucial component of alpha generation and risk mitigation because of dynamics such as business cycle, stability of currency and political developments.
  • Themes (both secular and cyclical) can be more powerful in emerging markets due to early stages of economic development.
  • Fundamental research is key. We seek to invest primarily in companies with long-term sustainable earnings growth. We also look to identify companies at an earnings inflection not yet reflected in valuation.
  • Investing across the valuation spectrum (growth and value) allows us to capitalize on the inefficiencies of emerging market equities depending on the market cycle.

Investment Process

The investment process utilizes a combined top-down and bottom-up investment approach, with an eye on risk management, to find what we believe are the best positioned companies with the potential for earnings growth in healthy industries that are benefiting from macroeconomic drivers.

The strategy utilizes a variety of risk parameters in an attempt to manage risk in the portfolio. Parameters include security concentration limits, directional ranges for sector and country/regional weights as well as the utilization of multiple risk tools (MSCI Barra and FactSet) to examine portfolio risk and stress test the portfolio.

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Key Features

Composite Performance History Since 3/1/2014
Benchmark MSCI Emerging Markets Index
Market Capitalization No formal minimum – the strategy seeks companies across the market capitalization spectrum.
Annualized Turnover Typically 60–80%
Tracking Error Residual of the strategy's investment approach, but has historically ranged from 500–700 basis points.
Cash Allocation Cash is raised as a residual of stock selection process and is typically less than 5%, with a maximum allocation of 15%.
Sector Ranges Relative to Index 0–1.25X – materials
0–1.50X – energy, utilities
0–2.50X – consumer staples/discretionary, real estate
0.5–1.50X – financials
0.5–2.0X – communication services, industrials, information technology
0.5–4.0X – health care
Security Concentration Typically 50-80 positions. Position sizes are generally 1% to 3.5%. Mega-cap holdings are limited to 8% of the portfolio or 4% relative overweight to benchmark allocation.
Currency Hedging Minimal and view incorporated in stock selection process. Currency hedging used when cost of expressing a view is attractive. Currency hedging has averaged less than 10% of portfolio assets and we intend not to exceed 20%
Investment Vehicles Institutional Separate Account
Collective Investment Trust
U.S. Mutual Fund: Institutional Share Class