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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: 40-100% (estimated)
Net Assets: $161.3 million as of 03/31/2014
 
Portfolio Manager
Bhansali_Rupal_Web.png Rupal J. Bhansali
Portfolio Manager
 
Ariel International (DM/EM)

Schedule of Holdings

As of March 31, 2014
  Units Security Description Market Value % of Total Value
AUSTRALIA     568 0.1
  123 AMP Ltd. 568 0.1
AUSTRIA     2,369 0.7
  48 Vienna Insurance Group 2,369 0.7
BRAZIL     1,848 0.5
  87 Telefonica Brasil SA ADR 1,848 0.5
CANADA     7,249 2.1
  11 Fairfax Financial Holdings Ltd. 4,786 1.4
  27 Tim Hortons Inc. 1,496 0.4
  46 Canadian Oil Sands 967 0.3
CHINA     10,168 2.9
  57 Baidu, Inc. ADR 8,679 2.5
  46 Mindray Medical Intl Ltd. 1,489 0.4
FINLAND     13,139 3.8
  1,790 Nokia Corp. ADR 13,139 3.8
FRANCE     21,263 6.1
  295 Eutelsat Communications 10,026 2.9
  45 Technip SA 4,648 1.3
  104 BNP Paribas SA ADR 4,013 1.2
  19 L'Air Liquide S.A. 2,576 0.7
GERMANY     27,237 7.8
  189 Deutsche Boerse AG 15,054 4.3
  253 Dialog Semiconductor plc 6,254 1.8
  580 Telefonica Deutschland GmbH & Co. 4,627 1.3
  10 MTU Aero Engines AG 930 0.3
  10 Deutsche Post AG 372 0.1
HONG KONG     20,169 5.8
  371 China Mobile Ltd. ADR 16,914 4.9
  1,000 Yue Yuen Industrial 3,255 0.9
IRELAND     9,645 2.8
  164 Ryanair Holdings plc ADR 9,645 2.8
ITALY     15,401 4.4
  2,015 Snam SpA 11,807 3.4
  435 Mediaset SpA 2,434 0.7
  27 DiaSorin SpA 1,160 0.3
JAPAN     56,931 16.5
  286 Canon Inc. ADR 8,883 2.6
  130 Tokyo Electron Ltd. 7,983 2.3
  302 Daito Trust Construction Co., Ltd. AD 7,002 2.0
  80 Shimamura Co., Ltd. 6,936 2.0
  464 Nintendo Co., Ltd ADR 6,905 2.0
  52 Toyota Motor Corp. ADR 5,871 1.7
  50 Murata Manufacturing Co., Ltd. 4,726 1.4
  100 OBIC Co. Ltd. 3,165 0.9
  100 Japan Tobacco Inc. 3,146 0.9
  80 Nikon Corp. 1,291 0.4
  40 Chugai Pharmaceutical Co., Ltd. 1,023 0.3
LUXEMBOURG     2,408 0.7
  21 RTL Group 2,408 0.7
NETHERLANDS     28,950 8.3
  848 Ahold N.V. ADR 17,041 4.9
  163 Royal Dutch Shell plc ADR 11,909 3.4
SPAIN     4,014 1.2
  71 Tecnicas Reunidas SA 4,014 1.2
SWEDEN     3,184 0.9
  19 Autoliv Inc. 1,907 0.5
  30 H&M Hennes & Mauritz AB 1,277 0.4
SWITZERLAND     50,514 14.6
  570 Roche Holding Ltd. ADR 21,374 6.2
  127 Nestle SA ADR 9,568 2.8
  24 Zurich Insurance Group Ltd 7,376 2.1
  9 Swisscom AG 5,534 1.6
  237 UBS AG ADR 4,911 1.4
  3 Banque Cantonale Vaudoise 1,751 0.5
TURKEY     2,077 0.6
  305 Turkiye Garanti Bankasi ADR 1,044 0.3
  75 Turkcell Iletisim Hizmetleri AS ADR 1,033 0.3
UNITED KINGDOM     42,572 12.3
  307 GlaxoSmithKline PLC ADR 16,403 4.7
  646 Tesco plc ADR 9,544 2.7
  163 HSBC Holdings plc ADR 8,285 2.4
  52 BT Group plc ADR 3,320 1.0
  66 Croda Intl plc 2,802 0.8
  8 British American Tobacco plc ADR 891 0.3
  71 IG Group Holdings plc 743 0.2
  22 GlaxoSmithKline plc 584 0.2
UNITED STATES     15,509 4.5
  66 Harman Intl Industries Inc. 7,022 2.0
  37 Philip Morris Intl Inc. 3,029 0.9
  103 Tumi Holdings Inc. 2,331 0.7
  103 TIBCO Software Inc. 2,093 0.6
  85 Ruckus Wireless, Inc. 1,034 0.3
Total Equities     335,215 96.6
Cash Balance     11,912 3.4
Grand Total     347,127 100.0

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 March 31, 2014
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year To
Date
One
Year
Since
Inception
Gross of Fees -0.57% 1.52% 1.52% 23.76% 15.97%
Net of Fees -0.64% 1.32% 1.32% 22.59% 14.85%
MSCI ACWI ex-US 0.32% 0.61% 0.61% 12.80% 14.92%
Ariel International (DM/EM) Composite

Performance

As of March 31, 2014
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year To
Date
One
Year
Since
Inception
Gross of Fees -0.57% 1.52% 1.52% 23.76% 15.97%
Net of Fees -0.64% 1.32% 1.32% 22.59% 14.85%
MSCI ACWI ex-US 0.32% 0.61% 0.61% 12.80% 14.92%


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, 2012. 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 December 31, 2013
  Ariel International (DM/EM) MSCI ACWI ex US
Information Technology 21.69 6.56
Consumer Discretionary 15.94 10.81
Financials 15.33 26.77
Consumer Staples 14.10 9.94
Health Care 12.39 7.86
Telecommunication Services 7.49 5.85
Energy 5.40 9.36
Industrials 3.43 11.21
Utilities 3.14 3.33
Materials 1.08 8.31

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.