Global Strategy
Ariel International (DM/EM)

Our global investment philosophy


Patience

We take the long-term view.
  • Emphasis on 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.
  • Focus on connecting information versus collecting information
  • Take business analyst approach rather than financial analyst approach
  • Have extensive interactions with management teams around the world
  • Research a company's global peers to fully 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
 
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Rupal Bhansali on International and Global Investing II

Why Ariel’s global approach


Experience matters

  • Rupal J. Bhansali has more than 25 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: $235.4 million
as of 6/30/2016
 
Portfolio Manager
Bhansali_Rupal_Web.png Rupal J. Bhansali
Portfolio Manager
 
Ariel International (DM/EM)

Schedule of Holdings

As of June 30, 2016
  Units Security Description Market Value % of Total Value
BRAZIL     718,693 1.5
  36,461 Itau Unibanco Holding SA ADR 344,192 0.7
  29,992 Multiplus SA 338,954 0.7
  4,045 BB Seguridade Participacoes 35,547 0.1
CANADA     1,368,893 2.7
  30,478 IGM Financial Inc. 825,881 1.6
  10,601 Suncor Energy, Inc. 292,734 0.6
  6,211 Rogers Communications Inc. 250,278 0.5
CHILE     805,869 1.6
  41,604 Banco Santander-Chile ADR 805,869 1.6
CHINA     3,065,961 6.0
  17,894 Baidu, Inc. ADR 2,955,194 5.8
  184,000 Lenovo Group Ltd 110,767 0.2
CZECH REPUBLIC     41,099 0.1
  1,100 Komercni Banka AS 41,099 0.1
FRANCE     2,445,742 4.9
  16,363 Michelin (CGDE) 1,550,246 3.1
  10,615 BNP Paribas SA 469,201 0.9
  3,381 Euler Hermes Group 282,915 0.6
  1,371 L'Air Liquide SA 143,380 0.3
GERMANY     7,322,332 14.5
  37,110 Deutsche Boerse AG 3,034,322 6.0
  72,951 Dialog Semiconductor plc 2,174,579 4.3
  391,787 Telefonica Deutschland Holding 1,608,705 3.2
  3,743 Beiersdorf AG 353,284 0.7
  1,699 SAP SE 126,868 0.3
  322 BASF SE 24,574 0.0
HONG KONG     3,427,219 6.7
  267,000 China Mobile Ltd. 3,051,171 6.0
  780,000 Li & Fung Ltd 376,048 0.7
IRELAND     307,228 0.6
  4,418 Ryanair Holdings plc ADR 307,228 0.6
ITALY     740,972 1.5
  111,600 Snam SpA 665,083 1.3
  1,241 DiaSorin SpA 75,889 0.2
JAPAN     6,565,481 12.9
  10,000 Shimamura Co., Ltd. 1,479,821 2.9
  7,300 Daito Trust Construction Co., Ltd. 1,184,168 2.3
  7,700 Nintendo Co., Ltd. 1,094,799 2.2
  169,400 Anritsu Corp 972,671 1.9
  30,300 Canon Inc. 860,292 1.7
  59,200 Nikon Corp. 799,875 1.6
  900 Murata Manufacturing Co., Ltd. 99,844 0.2
  6,500 Japan Exchange Group, Inc. 74,011 0.1
LUXEMBOURG     520,355 1.0
  9,487 Tenaris ADR 273,605 0.5
  3,026 RTL Group 246,750 0.5
MEXICO     257,111 0.5
  28,285 Santander Mexico Financial Group ADR 257,111 0.5
NETHERLANDS     3,434,735 6.8
  106,820 Ahold N.V. 2,363,485 4.7
  17,585 Gemalto N.V. 1,071,250 2.1
SINGAPORE     217,718 0.4
  15,900 United Overseas Bank Ltd. 217,718 0.4
SPAIN     1,323,810 2.6
  47,708 Endesa SA 956,388 1.9
  12,349 Tecnicas Reunidas SA 367,422 0.7
SWEDEN     324,288 0.6
  11,141 H & M Hennes & Mauritz AB 324,288 0.6
SWITZERLAND     4,853,948 9.7
  10,497 Roche Holding AG 2,760,213 5.5
  3,137 Swisscom AG 1,554,747 3.1
  15,910 UBS AG 205,340 0.4
  1,697 Nestle SA 130,942 0.3
  45 SGS SA 102,850 0.2
  578 Novartis AG ADR 47,691 0.1
  1,375 ABB Ltd. 26,993 0.1
  180 Kuehne & Nagel Intl AG 25,172 0.0
THAILAND     252,437 0.5
  48,000 Kasikornbank/F 235,965 0.5
  3,400 Kasikornbank PCL 16,472 0.0
UAE     73,062 0.1
  212,953 Dubai Financial Market 73,062 0.1
UNITED KINGDOM     7,528,400 14.9
  60,654 GlaxoSmithKline plc ADR 2,628,744 5.2
  20,399 Reckitt Benckiser Group plc 2,051,486 4.1
  5,357 British American Tobacco plc ADR 693,624 1.4
  81,971 British Telecom Group plc 451,255 0.9
  18,706 GlaxoSmithKline plc 402,994 0.8
  13,541 Diageo plc 379,356 0.8
  82,454 Countrywide plc 271,905 0.5
  39,968 HSBC Holdings plc 250,025 0.5
  11,477 IG Group Holdings plc 124,745 0.2
  1,002 Diageo plc ADR 113,106 0.2
  37,885 Hays Plc 49,673 0.1
  1,446 Markit Ltd 47,140 0.1
  10,163 Pagegroup Plc 40,542 0.1
  486 Rightmove Plc 23,805 0.0
UNITED STATES     844,263 1.7
  21,670 ISHARES MSCI ACWI EX US ETF 844,263 1.7
Total Equities     46,439,616 91.8
Forward Position Long     236,290 0.5
Cash Balance     3,855,312 7.7
Grand Total     50,531,218 100.0

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 seeks downside protection
  • Process:
    Screen on risk, not growth rate or valuation
  • Risk management:
    Eliminate approximately 60% of high-risk stocks in universe
  • Benefit:
    Position for 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:
    Incorporate macro and micro factors in scenario analyses; lead analyst presents balanced case versus a recommendation
  • 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:
    Typically cap security position size at 5% at time of purchase, sector weights at the higher of 25% or 1.5x benchmark, hedge currency if practical and cost-efficient
  • Benefit:
    Designed to generate superior long-term, risk-adjusted performance

Quarter End
Month End

Ariel International (DM/EM) Composite Performance

As of August 31, 2016
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year
To Date
One
Year
Three
Years
Since
Inception
Gross of Fees 0.00% 3.41% 6.00% 4.78% 6.37% 8.56%
Net of Fees -0.07% 3.20% 5.44% 3.95% 5.50% 7.60%
MSCI ACWI ex-US 0.63% 3.99% 4.53% 2.92% 2.03% 5.38%

Ariel International (DM/EM) Composite Performance

As of June 30, 2016
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year
To Date
One
Year
Three
Years
Since
Inception
Gross of Fees -1.30% -2.42% 1.17% -3.73% 5.85% 7.76%
Net of Fees -1.37% -2.61% 0.77% -4.50% 4.98% 6.82%
MSCI ACWI ex-US -1.53% -0.64% -1.02% -10.24% 1.16% 4.31%


Ariel Investments, LLC is a money management firm headquartered in Chicago, Illinois, with offices in New York and Sydney. 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 as a primary objective. The strategy’s secondary objective is to generate attractive absolute and risk-adjusted returns, and to attain higher relative returns compared to its benchmark over a full market cycle. The strategy invests primarily in equity securities of foreign (non-U.S.) issuers in developed or emerging markets. The Ariel International (DM/EM) Composite differs from its benchmark, the MSCI ACWI (All Country World Index) ex-US Index, because: (i) the Composite has fewer holdings than the benchmark and (ii) the Composite will at times invest a portion of its assets in the U.S. Index returns reflect the reinvestment of income and other earnings. Indexes are unmanaged, and investors cannot invest directly in an index.

The strategy will invest in foreign securities through the purchase of individual securities on recognized foreign exchanges and over-the-counter markets, or through American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”), or other securities representing underlying shares of foreign companies, including, but not limited to, certificates of deposit issued by foreign banks and foreign branches of U.S. banks, participatory notes (instruments issued by registered foreign financial intermediaries to U.S. institutional investors), or other instruments that allow the strategy to participate in foreign markets. The strategy will invest in large, medium, or small companies without regard to market capitalization. The strategy also will at times invest a portion of its assets in equity securities based in the U.S.

The strategy uses various techniques to hedge currency exposure, or to invest significant cash inflows in the market (i.e., reducing “cash drag”), including derivatives, exchange-traded funds (“ETFs”), and other hedges. The strategy will buy and sell currency on a spot basis (i.e., foreign currency trades that settle within two days) and enter into foreign currency forward contracts. The strategy at times will buy and sell foreign currency options and securities, securities index options or futures, other futures contracts or options, and enter into swap agreements, which are types of derivatives. Ariel uses these techniques in an attempt to decrease the strategy’s exposure to changing security prices or foreign currency risk, or to reduce unintended tracking error versus its respective benchmarks, or to address other factors that affect security values. The strategy will at times 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 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, 2015. 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 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 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 net returns reflect the reinvestment of income and other earnings, including the dividends net of the maximum withholding tax applicable to non-resident institutional investors that do not benefit from double taxation treaties. MSCI uses the maximum tax rate applicable to institutional investors, as determined by the companies' country of incorporation. 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, 2016
  Ariel International (DM/EM) MSCI ACWI ex-US
Information Technology 20.81 8.93
Financials 19.29 24.44
Telecommunication Services 15.17 5.31
Consumer Staples 13.35 11.66
Health Care 12.97 9.41
Consumer Discretionary 11.22 11.34
Utilities 3.56 3.61
Energy 2.05 6.86
Industrials 1.21 11.31
Materials 0.37 7.15

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. The Ariel mutual funds 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.

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