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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
  • 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
Style: International equity - intrinsic value
Market Cap Range: All Cap
Inception: December 31, 2011
Number of companies: 50-150
Turnover: 30-80%
Net Assets: $637.3 million
as of 3/31/2018
 
Portfolio Manager
Bhansali_Rupal_Web.png Rupal J. Bhansali
Portfolio Manager
 
Ariel International (DM/EM)

Schedule of Holdings

As of March 31, 2018
  Units Security Description Market Value % of Total Value
AUSTRALIA     130,921 0.2
  34,147 AMP Ltd. 130,921 0.2
BELGIUM     37,164 0.1
  371 Galapagos NV 37,164 0.1
BRAZIL     388,895 0.7
  27,083 BB Seguridade Participacoes SA 240,131 0.4
  15,919 Multiplus SA 148,764 0.3
CANADA     1,516,833 2.7
  29,208 IGM Financial Inc. 853,362 1.5
  12,067 Suncor Energy, Inc. 416,387 0.7
  9,664 Hydro One LTD 156,803 0.3
  1,604 Magna International 90,281 0.2
CHILE     1,134,146 1.9
  33,845 Banco Santander-Chile ADR 1,134,146 1.9
CHINA     3,338,945 5.7
  14,677 Baidu, Inc. ADR 3,275,760 5.6
  6,000 Shenzhou International Group 63,185 0.1
FINLAND     1,357,945 2.3
  245,732 Nokia Corp. 1,357,945 2.3
FRANCE     3,616,627 6.2
  17,090 Michelin (CGDE) 2,524,755 4.3
  7,864 Safran 833,103 1.4
  1,708 Thales SA 208,218 0.4
  628 Sanofi 50,551 0.1
GERMANY     6,864,120 11.8
  32,773 Deutsche Boerse AG 4,466,109 7.7
  438,610 Telefonica Deutschland Holding 2,062,267 3.5
  10,439 Dialog Semiconductor plc 248,177 0.4
  2,057 GEA Group AG 87,567 0.2
HONG KONG     3,646,683 6.3
  322,000 China Mobile Ltd. 2,951,919 5.1
  1,420,000 Li & Fung Ltd. 694,764 1.2
ITALY     1,648,549 2.8
  299,107 Snam SpA 1,375,760 2.4
  6,745 Azimut Holdings SpA 144,981 0.2
  21,361 Italgas Spa 127,808 0.2
JAPAN     10,417,341 17.9
  5,700 Nintendo Co., Ltd. 2,513,665 4.3
  77,700 NTT DOCOMO, Inc. 1,986,374 3.4
  31,100 Nippon Telegraph & Telephone Corp. 1,434,124 2.5
  9,200 Shimamura Co., Ltd. 1,152,381 2.0
  25,300 Japan Tobacco Inc. 730,000 1.3
  19,200 Subaru Corp 630,062 1.1
  180,800 Seven Bank Ltd. 576,804 1.0
  4,100 Secom Co., Ltd. 305,590 0.5
  5,900 Takeda Pharmaceutical Co Ltd 287,782 0.5
  4,900 Mabuchi Motor Co Ltd 241,634 0.4
  6,100 Ono Pharmaceutical Co Ltd 189,097 0.3
  1,000 Daito Trust Construction Co., Ltd. 173,066 0.3
  3,800 Askul Corp 128,204 0.2
  500 Murata Manufacturing Co., Ltd. 68,558 0.1
LUXEMBOURG     1,011,386 1.8
  16,086 Tenaris ADR 557,702 1.0
  5,459 RTL Group 453,684 0.8
MEXICO     523,027 0.9
  39,311 Banco Santander Mexico SA ADR 281,860 0.5
  94,689 Wal-Mart de Mexico SAB de CV 241,167 0.4
NETHERLANDS     5,011,242 8.6
  129,773 Ahold N.V. 3,076,752 5.3
  31,622 Gemalto N.V. 1,934,490 3.3
SINGAPORE     113,605 0.2
  20,200 Singapore Exchange Ltd 113,605 0.2
SPAIN     2,288,315 4.0
  56,922 Endesa SA 1,254,374 2.2
  34,979 Tecnicas Reunidas SA 1,033,941 1.8
SWITZERLAND     5,122,761 8.6
  12,770 Roche Holding AG 2,932,632 5.0
  3,061 Swisscom AG 1,519,495 2.6
  124 SGS SA 305,172 0.5
  11,145 UBS AG 196,193 0.3
  1,418 Novartis AG 114,830 0.2
  174 Kuehne & Nagel Intl AG 27,411 0.0
  341 Nestle SA 27,028 0.0
THAILAND     661,428 1.2
  92,300 Kasikornbank-R 627,569 1.1
  1,079 Fabrinet 33,859 0.1
UAE     103,592 0.2
  365,820 Dubai Financial Market 103,592 0.2
UNITED KINGDOM     5,299,643 9.2
  168,752 GlaxoSmithKline plc 3,300,692 5.7
  17,589 Reckitt Benckiser Group plc 1,489,154 2.6
  45,292 National Grid PLC 509,797 0.9
UNITED STATES     562,703 1.0
  5,661 PHILIP MORRIS INTL INC COM 562,703 1.0
Total Equities     54,795,871 94.3
Forward Position Short     -208,214 -0.4
Cash Balance     3,622,879 6.1
Grand Total     58,210,536 100.0

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

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

You may also be interested in
Ariel Investments Director of Research for International & Global Equities Chaim Schneider discusses the research process for the Ariel Global Strategy.
Portfolio Manager Rupal Bhansali shares her unique approach to managing risk.
 
Quarter End
Month End

Ariel International (DM/EM) Composite Performance

As of April 30, 2018
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year
To Date
One
Year
Three
Years
Five
Years
Since
Inception
Gross of Fees 1.21% -2.19% 2.46% 12.96% 5.45% 8.37% 9.32%
Net of Fees 1.14% -2.39% 2.19% 12.06% 4.61% 7.49% 8.39%
MSCI ACWI ex-US 1.60% -4.90% 0.40% 15.91% 5.01% 5.46% 8.02%

Ariel International (DM/EM) Composite Performance

As of March 31, 2018
Inception date: December 31, 2011 Annualized
  One
Month
Three
Months
Year
To Date
One
Year
Three
Years
Five
Years
Since
Inception
Gross of Fees -0.64% 1.24% 1.24% 13.38% 6.54% 9.03% 9.24%
Net of Fees -0.71% 1.04% 1.04% 12.48% 5.69% 8.13% 8.31%
MSCI ACWI ex-US -1.76% -1.18% -1.18% 16.53% 6.18% 5.89% 7.86%


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, 2016. 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 March 31, 2018
  Ariel International (DM/EM) MSCI ACWI ex-US
Telecommunication Services 18.17 3.93
Information Technology 17.21 11.71
Financials 16.19 23.16
Health Care 12.62 7.71
Consumer Staples 11.18 9.47
Consumer Discretionary 10.74 11.36
Energy 6.18 6.71
Utilities 3.74 2.97
Industrials 3.67 11.80
Real Estate 0.32 3.17
Materials 0.00 8.01

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. 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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