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Ariel International (DM/EM)

Our global investment philosophy


Patience

We take the long-term view.
  • Complementary objectives: Higher absolute and relative returns over a full market cycle with less risk
  • Focus research as much on what can go wrong as what can go right

Independence

We invest to our convictions, not to benchmarks.
  • Benchmark aware only to the extent that tracking error is by design and not by default
  • Significant exposure to our highest-conviction ideas, tempered with prudent risk controls

Expertise

We specialize in bottom-up fundamental research.
  • Ask questions to gain insight, not just information
  • Conduct in-country visits
  • Take business analyst approach rather than stock analyst approach
  • Research a company’s global peers to inform our competitive assessment

Teamwork

We work collaboratively with a shared commitment to excellence.
  • Debate best, base and worst case scenarios for every company considered
  • Three team members with clearly defined roles vet each stock

 
RB-Int-Global-Investing1.png
Rupal Bhansali on International and Global Investing I
 
RB-Int-Global-Investing2.png
Rupal Bhansali on International and Global Investing II

Why Ariel’s global approach


Our emphasis is on generating attractive absolute and relative returns while seeking to limit downside risk in our global portfolios.

Experience matters

Rupal J. Bhansali, our chief investment officer for international equities, has more than 20 years of industry experience.

Managing risk is a top priority

We pay as much attention to risk management as to return management.

Screening out provides a stronger starting point

While others screen in, we begin our process by screening out high-risk companies.

All-cap portfolios offer larger opportunity set

Although our portfolios are relatively concentrated, we consider companies of all sizes.

Attention to business models builds more resilient portfolios

In addition to applying our financial models, we consider the long-term viability of each company’s business model.

Facts
Market Cap Range: All Cap
Inception: December 31, 2011
Number of companies: 50-150
Turnover: 30-80%
Net Assets: $169.8 million as of 06/30/2014
 
Portfolio Manager
Bhansali_Rupal_Web.png Rupal J. Bhansali
Portfolio Manager
 
Ariel International (DM/EM)

Schedule of Holdings

As of June 30, 2014
  Units Security Description Market Value % of Total Value
    40,897 0.1
  1 Forward Position Long 40,897 0.1
AUSTRALIA     181,613 0.3
  36,302 AMP Ltd. 181,613 0.3
AUSTRIA     521,735 1.0
  9,746 Vienna Insurance Group 521,735 1.0
BRAZIL     988,314 1.9
  23,730 Telefonica Brasil SA ADR 486,702 0.9
  15,152 Multiplus SA 250,849 0.5
  19,428 Souza Cruz SA 200,706 0.4
  3,481 Itau Unibanco Holding SA ADR 50,057 0.1
CANADA     882,093 1.6
  16,068 Canadian Oil Sands Ltd. 364,904 0.7
  4,089 Tim Hortons Inc. 224,165 0.4
  358 Fairfax Financial Holdings Ltd. 170,209 0.3
  2,560 IGM Financial Inc. 122,815 0.2
CHILE     306,741 0.6
  11,597 Banco Santander-Chile ADR 306,741 0.6
CHINA     1,561,669 2.9
  7,209 Baidu, Inc. ADR 1,346,713 2.5
  6,824 Mindray Medical Intl Ltd. 214,956 0.4
CZECH REPUBLIC     241,974 0.5
  1,051 Komercni Banka AS 241,974 0.5
DENMARK     51,309 0.1
  1,017 Vestas Wind Systems AS 51,309 0.1
FINLAND     49,959 0.1
  1,280 Nokian Renkaat Oyj 49,959 0.1
FRANCE     3,685,480 6.9
  43,297 Eutelsat Communications 1,504,603 2.8
  9,860 Technip SA 1,078,767 2.0
  10,615 BNP Paribas SA 720,241 1.4
  2,828 L'Air Liquide SA 381,869 0.7
GERMANY     4,862,026 9.0
  32,222 Deutsche Boerse AG 2,501,154 4.7
  36,013 Dialog Semiconductor plc 1,249,013 2.3
  118,685 Telefonica Deutschland GmbH & Co. 981,565 1.8
  1,416 MTU Aero Engines AG 130,294 0.2
HONG KONG     3,081,364 5.8
  267,000 China Mobile Ltd. 2,590,815 4.9
  146,500 Yue Yuen Industrial 490,549 0.9
IRELAND     1,167,392 2.2
  20,921 Ryanair Holdings plc ADR 1,167,392 2.2
ITALY     2,363,333 4.4
  290,055 Snam SpA 1,747,798 3.3
  91,425 Mediaset SpA 445,731 0.8
  4,052 DiaSorin SpA 169,804 0.3
JAPAN     7,818,482 14.7
  13,800 Shimamura Co., Ltd. 1,356,841 2.5
  40,700 Canon Inc. 1,324,257 2.5
  10,600 Daito Trust Construction Co., Ltd. 1,246,259 2.3
  10,200 Nintendo Co., Ltd. 1,220,879 2.3
  11,300 Tokyo Electron Ltd. 763,893 1.4
  12,200 Denso Corp. 582,300 1.1
  6,000 Murata Manufacturing Co., Ltd. 561,560 1.1
  7,400 OBIC Co., Ltd. 243,988 0.5
  13,700 Nikon Corp. 215,711 0.4
  4,900 JIN Co., Ltd. 156,239 0.3
  5,200 Chugai Pharmaceutical Co., Ltd. 146,555 0.3
LUXEMBOURG     332,103 0.6
  2,985 RTL Group 332,103 0.6
MEXICO     304,829 0.6
  22,954 Santander Mexico Financial Group ADR 304,829 0.6
NETHERLANDS     4,076,416 7.6
  124,646 Ahold N.V. 2,340,313 4.4
  20,177 Royal Dutch Shell plc ADR 1,661,979 3.1
  715 Gemalto NV 74,124 0.1
PORTUGAL     46,187 0.1
  2,807 Jeronimo Martins SGPS SA 46,187 0.1
SINGAPORE     144,580 0.3
  8,000 United Overseas Bank Ltd. 144,580 0.3
SPAIN     579,614 1.0
  8,132 Tecnicas Reunidas SA 503,099 0.9
  11,449 Banco Popular EspaƱol SA 76,515 0.1
SWEDEN     192,756 0.4
  4,413 H&M Hennes & Mauritz AB 192,756 0.4
SWITZERLAND     6,723,949 12.6
  8,851 Roche Holding AG 2,640,436 5.0
  4,395 Zurich Insurance Group Ltd 1,324,999 2.5
  14,897 Nestle SA 1,154,285 2.2
  1,311 Swisscom AG 762,235 1.4
  33,195 UBS AG 609,141 1.1
  427 Banque Cantonale Vaudoise 232,853 0.4
THAILAND     626,875 1.2
  73,600 Kasikornbank PCL 463,122 0.9
  108,900 BEC World Public Co., Ltd. 163,753 0.3
TURKEY     773,902 1.5
  29,882 Turkcell Iletisim Hizmetleri AS ADR 466,159 0.9
  13,421 BIM Birlesik Magazalar A.S. 307,743 0.6
UNITED KINGDOM     7,457,992 14.1
  48,948 GlaxoSmithKline plc ADR 2,617,739 4.9
  360,576 Tesco plc 1,752,920 3.3
  147,647 HSBC Holdings plc 1,497,433 2.8
  81,971 British Telecom Group plc 539,696 1.0
  4,311 British American Tobacco plc ADR 513,354 1.0
  9,888 Croda Intl plc 372,280 0.7
  7,493 Sage Group plc 49,231 0.2
  11,477 IG Group Holdings plc 115,339 0.2
UNITED STATES     3,283,809 6.2
  18,800 Vanguard MSCI Pacific ETF 1,170,112 2.2
  24,762 Vanguard FTSE Emerging Markets ETF 1,067,985 2.0
  24,553 Vanguard MSCI EAFE ETF 1,045,712 2.0
Total Equities     52,347,393 98.3
Cash Balance     916,749 1.7
Grand Total     53,264,142 100.0

Ariel International (DM/EM)

Commentary

 
Monthly Commentary: Perspectives on the current market
Quarterly Commentary: Quarterly performance update and communication to investors
Turtle Thoughts: A compilation of our portfolio manager letters
Fact Sheets: Quarterly product overview

Our global process


Negative Screening

Negative screening strives for downside protection
  • Process:
    Screen on risk, not growth rate or valuation
  • Risk management:
    Eliminate approximately 60% of high-risk stocks in benchmark
  • Benefit:
    Potential downside protection

Bottom-up Research

Proprietary bottom-up research enables better stock picking
  • Process:
    Lead analysts perform research
  • Risk management:
    Assess the prospects and durability of a business franchise
  • Benefit:
    Proprietary insights enable better stock picking

Team Validation

Team validation avoids blind spots in our analysis
  • Process:
    A team of three debates and stress tests each idea
  • Risk management:
    Go beyond industry specialist, avoiding groupthink by assigning devil’s advocate and "fresh" analyst
  • Benefit:
    Ideas vetted from multiple perspectives yield more informed final decisions by portfolio manager

Portfolio Construction

Portfolios constructed to manage risks as well as long-term performance
  • Process:
    Seek to own top decile of investment opportunities uncovered
  • Risk management:
    Cap security position size at 5% at cost, typically limit sector weights at the higher of 25% or 1.5x benchmark, hedge currency if practical and cost efficient
  • Benefit:
    A diverse portfolio that balances long-term performance with risk management

Quarter End
Month End
Ariel International (DM/EM) Composite

Performance

As of June 30, 2014
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year To
Date
One
Year
Since
Inception
Gross of Fees 1.77% 5.60% 7.32% 24.99% 16.84%
Net of Fees 1.70% 5.39% 6.89% 23.88% 15.73%
MSCI ACWI ex-US 1.72% 5.25% 5.89% 22.27% 15.68%
Ariel International (DM/EM) Composite

Performance

As of June 30, 2014
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year To
Date
One
Year
Since
Inception
Gross of Fees 1.77% 5.60% 7.32% 24.99% 16.84%
Net of Fees 1.70% 5.39% 6.89% 23.88% 15.73%
MSCI ACWI ex-US 1.72% 5.25% 5.89% 22.27% 15.68%


Ariel Investments, LLC is a money management firm headquartered in Chicago, Illinois. Taking a long-term view and applying independent thinking to our investment decisions, we span the market cap spectrum from micro to large and cover the globe with our international and global offerings. Ariel claims compliance with the Global Investment Performance Standards (GIPS®). The Ariel International (DM/EM) strategy seeks long-term capital appreciation by investing primarily in equity securities of foreign issuers in countries with developed or emerging markets. The Ariel International Composite (DM/EM) differs from its benchmark, the MSCI ACWI (All Country World Index) ex-US Index, with fewer holdings. Index returns reflect the reinvestment of income and other earnings. Indexes are unmanaged, and investors cannot invest directly in an index. Equity investments in foreign securities may be made in various forms, such as common stocks, preferred stocks, warrants, rights, convertible securities purchased on recognized foreign exchanges and developed over-the-counter markets, or in the form of depositary receipts such as American Depositary Receipts (ADRs) or Global Depositary Receipts (GDRs), or other securities representing underlying shares of foreign issues, including certificates of deposit issued by foreign banks and foreign branches of U.S. banks. The strategy may invest in large, medium, or small companies without regard to market capitalization. The strategy may use various techniques to hedge currency exposure, including derivatives, exchange-traded funds (ETFs), and other hedges. These techniques may include the following: buying and selling currency on a spot basis, entering into foreign currency forward contracts, buying and selling foreign currency options and securities, securities index options, futures contracts and related options, and entering into swap agreements. These techniques may be used for hedging purposes or to increase return through the use of derivatives as a substitute for securities or to reduce the risk of loss of certain holdings. The strategy may include the holding of cash or cash equivalents for defensive purposes. Cash equivalents are negotiable instruments, such as commercial paper, treasury bills, short-term government bonds, payable by third parties. Third parties may include foreign banks and foreign governments.

Performance results are net of transaction costs and reflect the reinvestment of dividends and other earnings. Net returns reflect the deduction of the maximum advisory fee in effect for the respective period. Effective 1/1/14 the maximum fee is 0.80% per annum. Fees for prior periods are available upon request. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. Fee information is available upon request and may also be found in Ariel’s Form ADV, Part 2. Results shown may be preliminary. Returns are calculated in U.S. dollars. The Ariel International (DM/EM) Composite has been examined for the period from January 1, 2012 through December 31, 2013. A copy of the examination report is available upon request. Past performance does not guarantee future results. Investments in foreign securities may underperform and may be more volatile than comparable U.S. stocks because of the risks involving foreign economies and markets, foreign political systems, foreign regulatory standards, foreign currencies and taxes. The use of currency derivatives, ETFs, and other hedges may increase investment losses and expenses and create more volatility. Investments in emerging and developing markets present additional risks, such as difficulties in selling on a timely basis and at an acceptable price. The intrinsic value of the stocks in which the portfolio invests may never be recognized by the broader market. Click here to obtain a complete list of composite descriptions or a presentation that adheres to the GIPS standards.

The MSCI ACWI (All Country World Index) ex-US Index is an unmanaged, market-weighted index of global developed and emerging markets, excluding the United States. 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.

Ariel International (DM/EM) (Representative Portfolio)

Sector Weightings (%)

As of June 30, 2014
  Ariel International (DM/EM) MSCI ACWI ex US
Financials 21.35 26.54
Information Technology 14.07 6.84
Consumer Staples 13.01 9.88
Consumer Discretionary 12.29 10.75
Telecommunication Services 12.00 5.18
Health Care 11.48 8.17
Energy 7.43 9.57
Utilities 3.60 3.62
Industrials 2.78 11.00
Materials 1.55 8.45
Unclassified 0.44 0.00

Represents percentage of total equity holdings in the representative portfolio

The MSCI ACWI (All Country World Index) ex-US Index is an unmanaged, market-weighted index of global developed and emerging markets, excluding the United States. 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.

These sectors are the Global Industry Classification Standard ("GICS"). GICS was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poors™, a division of The McGraw-Hill Companies, Inc. (S&P) and is licensed for use by Ariel Investments, LLC. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Past performance does not guarantee future results. © Ariel Investments, LLC. The mutual funds offered by Ariel Investment Trust are distributed by Ariel Distributors, LLC. Use of this website is subject to our Terms & Conditions of use. Each of the investment products, mutual funds or services referred to in this site may be offered only to persons in the United States. This web site should not be considered a solicitation or offering of any investment products, funds or services to investors outside the United States. Original illustrations © Omar Rayyan 2007.