Global Strategy
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: $159.6 million as of 09/30/2014
 
Portfolio Manager
Bhansali_Rupal_Web.png Rupal J. Bhansali
Portfolio Manager
 
Ariel International (DM/EM)

Schedule of Holdings

As of September 30, 2014
  Units Security Description Market Value % of Total Value
AUSTRALIA     121,185 0.2
  25,349 AMP Ltd. 121,185 0.2
AUSTRIA     440,319 0.9
  9,746 Vienna Insurance Group 440,319 0.9
BRAZIL     854,119 1.7
  23,730 Telefonica Brasil SA ADR 467,006 0.9
  15,152 Multiplus SA 182,574 0.4
  19,428 Souza Cruz SA 156,223 0.3
  3,481 Itau Unibanco Holding SA ADR 48,316 0.1
CANADA     1,113,645 2.2
  45,535 Canadian Oil Sands Ltd. 842,146 1.7
  358 Fairfax Financial Holdings Ltd. 160,811 0.3
  2,560 IGM Financial Inc. 110,688 0.2
CHILE     367,754 0.7
  16,648 Banco Santander-Chile ADR 367,754 0.7
CHINA     1,779,032 3.5
  7,209 Baidu, Inc. ADR 1,573,220 3.1
  6,824 Mindray Medical Intl Ltd. 205,812 0.4
CZECH REPUBLIC     250,266 0.5
  1,051 Komercni Banka AS 250,266 0.5
DENMARK     39,767 0.1
  1,017 Vestas Wind Systems AS 39,767 0.1
FINLAND     38,623 0.1
  1,280 Nokian Renkaat Corp. 38,623 0.1
FRANCE     3,536,475 7.1
  34,933 Eutelsat Communications 1,128,459 2.3
  12,939 Technip SA 1,089,041 2.2
  10,615 BNP Paribas SA 704,448 1.4
  3,034 L'Air Liquide SA 370,222 0.7
  2,104 Michelin (CGDE) 198,543 0.4
  3,391 Societe Television Francaise 1 45,762 0.1
GERMANY     4,997,910 9.9
  32,222 Deutsche Boerse AG 2,171,341 4.3
  282,979 Telefonica Deutschland GmbH & Co. 1,480,330 3.0
  42,711 Dialog Semiconductor plc 1,200,539 2.4
  1,416 MTU Aero Engines AG 120,952 0.2
  343 SAP America, Inc. 24,748 0.0
HONG KONG     3,442,662 6.9
  267,000 China Mobile Ltd. 3,086,278 6.2
  117,500 Yue Yuen Industrial Holdings Ltd. 356,384 0.7
IRELAND     1,247,780 2.5
  22,112 Ryanair Holdings plc ADR 1,247,780 2.5
ITALY     2,189,549 4.4
  290,055 Snam SpA 1,605,308 3.2
  112,481 Mediaset SpA 432,073 0.9
  4,052 DiaSorin SpA 152,168 0.3
JAPAN     6,714,812 13.2
  40,700 Canon Inc. 1,324,819 2.6
  13,800 Shimamura Co., Ltd. 1,268,156 2.5
  10,600 Daito Trust Construction Co., Ltd. 1,251,919 2.5
  10,200 Nintendo Co., Ltd. 1,109,363 2.2
  11,100 Tokyo Electron Ltd. 724,349 1.4
  12,200 Denso Corp. 562,230 1.1
  7,400 OBIC Co., Ltd. 264,454 0.5
  14,500 Nikon Corp. 209,522 0.4
LUXEMBOURG     256,067 0.5
  2,985 RTL Group 256,067 0.5
MEXICO     310,568 0.6
  22,954 Santander Mexico Financial Group ADR 310,568 0.6
NETHERLANDS     3,837,690 7.7
  138,029 Ahold N.V. 2,235,951 4.5
  20,177 Royal Dutch Shell plc ADR 1,536,075 3.1
  715 Gemalto N.V. 65,664 0.1
PORTUGAL     73,917 0.1
  6,710 Jeronimo Martins SGPS SA 73,917 0.1
SINGAPORE     140,573 0.3
  8,000 United Overseas Bank Ltd. 140,573 0.3
SPAIN     444,878 0.9
  6,346 Tecnicas Reunidas SA 336,705 0.7
  17,622 Banco Popular EspaƱol SA 107,928 0.2
  17,622 Banco Popular Espanol SA 245 0.0
SWEDEN     183,366 0.4
  4,413 H&M Hennes & Mauritz AB 183,366 0.4
SWITZERLAND     6,529,321 13.1
  8,851 Roche Holding AG 2,622,855 5.2
  16,038 Nestle SA 1,179,339 2.4
  3,367 Zurich Insurance Group Ltd 1,003,749 2.0
  1,481 Swisscom AG 841,002 1.7
  33,195 UBS AG 578,882 1.2
  427 Banque Cantonale Vaudoise 228,844 0.5
  36 SGS SA 74,650 0.1
THAILAND     692,213 1.4
  73,600 Kasikornbank PCL 533,498 1.1
  108,900 BEC World Public Co., Ltd. 158,715 0.3
TURKEY     673,112 1.4
  29,882 Turkcell Iletisim Hizmetleri AS ADR 392,649 0.8
  13,421 BIM Birlesik Magazalar A.S. 280,463 0.6
UNITED KINGDOM     6,644,702 13.3
  48,948 GlaxoSmithKline plc ADR 2,250,140 4.5
  147,647 HSBC Holdings plc 1,499,218 3.0
  360,576 Tesco plc 1,088,862 2.2
  81,971 British Telecom Group plc 504,641 1.0
  4,311 British American Tobacco plc ADR 487,488 1.0
  8,017 Croda Intl plc 266,930 0.5
  10,153 GlaxoSmithKline plc 232,666 0.5
  11,477 IG Group Holdings plc 110,656 0.2
  1,190 Reckitt Benckiser Group PLC 103,252 0.2
  17,018 Sage Group plc 100,849 0.2
UNITED STATES     1,788,683 3.6
  18,945 Vanguard FTSE Emerging Markets ETF 790,196 1.6
  18,767 Vanguard MSCI EAFE ETF 745,988 1.5
  4,258 Vanguard MSCI Pacific ETF 252,499 0.5
Total Equities     48,708,988 97.2
Forward Position Long     11,030 0.0
Grand Total     48,720,018 97.2

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 September 30, 2014
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year To
Date
One
Year
Since
Inception
Gross of Fees -4.63% -6.03% 0.85% 5.82% 12.62%
Net of Fees -4.69% -6.22% 0.25% 4.93% 11.56%
MSCI ACWI ex-US -4.81% -5.19% 0.39% 5.22% 11.96%
Ariel International (DM/EM) Composite

Performance

As of September 30, 2014
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year To
Date
One
Year
Since
Inception
Gross of Fees -4.63% -6.03% 0.85% 5.82% 12.62%
Net of Fees -4.69% -6.22% 0.25% 4.93% 11.56%
MSCI ACWI ex-US -4.81% -5.19% 0.39% 5.22% 11.96%


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 developed or emerging market countries. 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. The MSCI ACWI ex US Index (gross) returns reflect the reinvestment of income and other earnings, including the maximum possible dividends. 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 September 30, 2014
  Ariel International (DM/EM) MSCI ACWI ex US
Financials 20.71 27.02
Telecommunication Services 14.60 5.35
Information Technology 13.77 6.95
Consumer Staples 12.08 9.79
Health Care 11.78 8.70
Consumer Discretionary 10.82 10.55
Energy 8.20 9.05
Utilities 3.46 3.62
Industrials 3.20 10.93
Materials 1.37 8.03
Unclassified 0.00 0.01

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.