INSTITUTIONALInstitutional Strategies
International Core Equity
Investment Philosophy
As an active manager, our investment approach is best described as relative value, or seeking investments with valuations that appear inexpensive relative to their potential and/or to their global peers. Our valuation methodology is multi-faceted, as we strive to identify mispriced countries, currencies, sectors, markets and ultimately stocks with attractive relative valuations. We believe the core/blend strategy gives us the flexibility to position the portfolio across equity styles, which allows us to maximize returns across market cycles.
Investment Process
The investment process utilizes both a top-down and bottom-up investment approach, combined with active risk management, to find what we believe are the best positioned companies with strong free cash flows that benefit from our top-down view and identified investment themes.
Top-down approach: Macroeconomic analysis and theme creation
Foremost, we seek to determine where markets are in a particular economic business cycle, and then analyze their projected growth rates, currency outlook and geopolitical issues. In addition, we identify global themes that are intended to be long-term alpha generators. We also evaluate valuations across markets and sectors to identify potential dislocations and investment opportunities given market prices.
Bottom-up approach: Fundamental analysis focusing on valuations
In our bottom-up analysis, we search for securities we think should benefit from factors identified in our top-down view. Fundamental analysis focuses on cash flow generation, with an emphasis on companies with valuations that we believe do not yet reflect benefits from increasing sales growth and/or lower debt levels. Working with the firm’s global research team, investment theses are developed, and potential investment opportunities are evaluated utilizing a variety of valuation metrics that vary by region of the world and sector.
Risk management
The portfolio 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 weights as well as aggregate cyclical/defensive weights relative to the portfolio’s benchmark.
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Key Features
| Composite Performance History Since | 1/1/2005 |
|---|---|
| Benchmark | MSCI EAFE Index |
| Style | Fundamental, Core: Growth and Value |
| Target Alpha | Outperform the MSCI EAFE Index after expenses and fees over a full market cycle |
| Peer Universe | EAFE Large Cap Core Equity |
| Typical Tracking Error | 300-600 bps |
| Holdings Range | Typically 60-80 positions. Holdings are generally 1-3% and limited to 5%. |
| Max Position Size | 5% |
| Sector/Country |
Directionally indicative ranges, based on weighting of sector or country. 20% Index weight - 0.5x to 1.5x weight |
| Emerging Markets | Direct exposure up to 15%, generally 10% or less |
| Aggregate Risk Control Overlay | Monitor cyclical vs. defensive sectors in relation to benchmark. |
| Currency Hedging | Minimal and view incorporated in stock selection process. Currency hedging is typically initiated through foreign currency contracts for downside risk protection. |
| Investment Vehicles | Institutional Separate Account Collective Investment Trust U.S. Mutual Fund: Institutional Share Class Variable Insurance Portfolio |