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Intrinsic Value 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
  • Team members with defined roles vet each stock

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
Style: International equity - intrinsic value
Market Cap: All Cap
Inception: December 31, 2011
Number of companies: 50-150
Turnover: typically 30-80%
Net Assets: $1,004.5 million
as of 9/30/2019
 
Portfolio Manager
Bhansali_Rupal_Web.png Rupal J. Bhansali
Portfolio Manager
 
Ariel International (DM/EM)

Schedule of Holdings

As of September 30, 2019
  Units Security Description Market Value % of Total Value
BELGIUM     1,013,526 0.3
  6,650 Galapagos NV 1,013,526 0.3
CANADA     9,406,622 2.4
  128,275 IGM Financial Inc. 3,644,793 0.9
  110,091 Suncor Energy, Inc. 3,474,851 0.9
  20,829 Magna International 1,110,985 0.3
  32,911 Hydro One LTD 608,754 0.2
  1,286 Fairfax Financial Holdings Ltd. 567,239 0.1
CHILE     5,493,712 1.4
  196,204 Banco Santander-Chile ADR 5,493,712 1.4
CHINA     14,477,959 3.7
  140,891 Baidu, Inc. ADR 14,477,959 3.7
FINLAND     12,904,751 3.3
  2,473,912 Nokia Corp. 12,541,322 3.2
  12,881 Nokian Renkaat Corp. 363,429 0.1
FRANCE     20,207,634 5.2
  146,985 Michelin (CGDE) 16,408,886 4.2
  21,815 Safran 3,435,412 0.9
  3,159 Thales SA 363,336 0.1
GERMANY     43,626,043 11.2
  211,028 Deutsche Boerse AG 32,956,481 8.5
  3,613,920 Telefonica Deutschland Holding 10,090,071 2.6
  22,466 Rocket Internet SE 579,491 0.1
HONG KONG     20,690,514 5.3
  2,365,500 China Mobile Ltd. 19,568,165 5.0
  9,886,000 Li & Fung Ltd. 1,122,349 0.3
ITALY     9,462,840 2.4
  1,790,930 Snam SpA 9,047,754 2.3
  64,293 Italgas Spa 415,086 0.1
JAPAN     86,049,195 22.1
  60,200 Nintendo Co., Ltd. 22,291,964 5.7
  559,600 NTT DOCOMO, Inc. 14,254,719 3.7
  266,600 Nippon Telegraph & Telephone Corp. 12,718,849 3.3
  423,200 Japan Tobacco Inc. 9,264,781 2.4
  329,000 Subaru Corp 9,254,314 2.4
  204,300 Bridgestone Corp 7,909,241 2.0
  27,600 Daito Trust Construction Co., Ltd. 3,526,773 0.9
  73,600 Mabuchi Motor Co Ltd 2,741,059 0.7
  22,300 Secom Co., Ltd. 2,034,082 0.5
  11,000 Shimamura Co., Ltd. 871,247 0.2
  44,800 Ono Pharmaceutical Co Ltd 811,229 0.2
  49,800 Shizuoka Bank Ltd. 370,937 0.1
LUXEMBOURG     4,210,141 1.1
  111,785 Tenaris ADR 2,367,606 0.6
  38,151 RTL Group 1,842,535 0.5
MEXICO     1,963,943 0.5
  663,066 Wal-Mart de Mexico SAB de CV 1,963,943 0.5
NETHERLANDS     21,078,285 5.4
  842,271 Ahold N.V. 21,078,285 5.4
SINGAPORE     1,257,424 0.3
  205,300 Singapore Exchange Ltd 1,257,424 0.3
SOUTH KOREA     4,154,379 1.1
  47,102 KT&G Corp 4,154,379 1.1
SPAIN     15,080,869 3.9
  327,174 Endesa SA 8,610,377 2.2
  263,316 Tecnicas Reunidas SA 6,470,492 1.7
SWITZERLAND     42,318,572 10.9
  93,684 Roche Holding AG 27,288,289 7.0
  21,135 Swisscom AG 10,434,499 2.7
  17,964 Kuehne & Nagel Intl AG 2,648,256 0.7
  78,200 UBS AG 888,538 0.2
  161 SGS SA 399,452 0.1
  4,280 Novartis AG 371,450 0.1
  2,653 Nestle SA 288,088 0.1
THAILAND     4,346,696 1.1
  748,200 Kasikornbank-R 3,828,455 1.0
  9,909 Fabrinet 518,241 0.1
UAE     383,929 0.1
  1,649,390 Dubai Financial Market 383,929 0.1
UNITED KINGDOM     35,219,894 9.2
  1,163,696 GlaxoSmithKline plc 25,017,949 6.5
  92,208 Reckitt Benckiser Group plc 7,208,553 1.9
  248,478 National Grid PLC 2,700,372 0.7
  114,982 Kingfisher PLC 293,020 0.1
UNITED STATES     15,451,148 4.0
  203,492 PHILIP MORRIS INTL INC COM 15,451,148 4.0
Total Equities     368,798,076 94.9
Forward Position Short     -239,173 -0.1
Cash Balance     19,171,665 5.2
Grand Total     387,730,568 100.0

Ariel International (DM/EM)

Product Materials

 
Portfolio Manager Letters:

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:
    Team 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, industry weights at the higher of 25% or 1.5x the 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 October 31, 2019
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year
To Date
One
Year
Three
Years
Five
Years
Since
Inception
Gross of Fees 1.58% 4.73% 11.04% 7.19% 6.39% 4.56% 7.27%
Net of Fees 1.51% 4.52% 10.31% 6.34% 5.54% 3.73% 6.37%
MSCI ACWI ex-US 3.49% 2.87% 15.45% 11.27% 8.07% 3.82% 6.25%

Ariel International (DM/EM) Composite Performance

As of September 30, 2019
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year
To Date
One
Year
Three
Years
Five
Years
Since
Inception
Gross of Fees 2.90% 1.15% 9.32% -0.76% 4.71% 4.24% 7.14%
Net of Fees 2.83% 0.95% 8.67% -1.55% 3.88% 3.41% 6.23%
MSCI ACWI ex-US 2.57% -1.80% 11.56% -1.23% 6.33% 2.90% 5.85%


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 seek long-term capital preservation, 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.) companies in developed or emerging markets. The strategy will invest in foreign securities by purchasing equity securities directly or through instruments that provide exposure to foreign companies. The strategy may invest in companies of any size. The strategy also may invest a portion of its assets in equity securities of companies based in the U.S. 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.

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 and enter into foreign currency forward contracts. 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.

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, 2018. 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 presentation that adheres to the GIPS standards.

Index returns reflect the reinvestment of income and other earnings. Indexes are unmanaged, and investors cannot invest directly in an index. 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 September 30, 2019
  Ariel International (DM/EM) MSCI ACWI ex-US
Communication Services 28.65 6.84
Consumer Staples 16.11 10.17
Health Care 14.78 8.54
Financials 13.39 21.61
Consumer Discretionary 10.28 11.40
Utilities 5.80 3.50
Information Technology 3.54 8.74
Energy 3.34 6.74
Industrials 3.15 11.94
Real Estate 0.96 3.21
Materials 0.00 7.31

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. This website and all of its content is for informational and educational purposes only and should not be considered to be investment advice or a recommendation to buy or sell any particular security. The mutual funds offered by Ariel Investment Trust are distributed by Ariel Distributors, LLC, a wholly-owned subsidiary of Ariel Investments, LLC. Use of this website is subject to our Terms & Conditions. 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 ineligible investors, investors for whom such products, funds or services are not suitable, or investors outside the United States.

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