(Formerly known as the Cambiar Unconstrained Equity Fund) The Cambiar Global Ultra Focus Fund is a concentrated, non-diversified portfolio that is made up of the highest conviction names from our Opportunity, Small Cap, SMID and International Equity Funds. In general, portfolio construction is based on a stock by stock analysis. The investment team will rely heavily on fundamentals and valuations, while taking into consideration global macro events.
The Fund may also engage in some proprietary shorting that Cambiar calls parent-subsidiary arbitrage (PASA). At certain times, the market valuation of a parent company and that of the subsidiary can become disconnected and nonsensical, creating unique opportunities.
Non-diversified fund designed for long-term capital appreciation
Concentrated 20-30 stock portfolio.
Global portfolio with a bias towards U.S. stocks.
Fund may hold derivatives, pair trades and occasional short positions.
Brian M. Barish, CFA
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Returns assume reinvestment of all dividend and capital gains distributions. Expense ratio is 1.40% (gross); 1.35% (net). Cambiar Investors, LLC has contractually agreed to reduce fees and reimburse expenses in order to keep net operating expenses from exceeding 1.10% of the average daily net assets of each of the Fund’s share classes until September 1, 2017. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index returns do not reflect any management fees, transaction costs or expenses. The MSCI World Index is an unmanaged index compiled by Morgan Stanley Capital International. The MSCI indices returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index. The Global Ultra Focus Fund is not a diversified fund. For performance data current to the most recent month-end, please call 1-866-777-8227.
The Fund charges a 2.00% redemption fee on redemptions of shares held for less than 180 days.
|Top 10 Holdings||% Weight|
|ACS Actividades Cons Y Serv||6.9|
|Royal Dutch Shell||4.8|
|% of Total||50.0|
|Holdings Subject to Change|
|Attributes||Cambiar||MSCI World||Russell 3000|
|Market Cap Wtd Avg||32.3 B||106.2 B||124.8 B|
|Market Cap Median||11.3 B||11.1 B||1.6 B|
|Sector Weights||Cambiar||MSCI World||Russell 3000|
|Risk Statistics*||Cambiar||MSCI World||Russell 3000|
Market Review (12.31.2016)
Global equity markets posted mixed returns for the final quarter of 2016. U.S. stocks were the bright spot for 4Q, as investors reacted positively to the pro-growth agenda put forth by the incoming Trump Administration. International equities missed the invite to the party put on by their U.S. counterparts, with most non-U.S. markets incurring modest negative returns for the quarter. Emerging Markets was hit the hardest, with the MSCI Emerging Markets Index returning -4.16%. Despite their 4Q setback, EM stocks were one of the top-performing markets (outside of the U.S.) in 2016.
Effective January 20, 2017, the Cambiar Unconstrained Fund has been renamed the Cambiar Global Ultra Focus Fund. While recognizing that this is the second name change for the Fund, clients should be assured that the underlying investment objective since the Fund’s inception in 2007 has (and will) remain the same: seek long-term capital appreciation by identifying quality companies that are trading at what we view to be a material disconnect relative to their normalized earnings power. Cambiar believes the Fund’s new name should provide greater clarity to existing and potential shareholders. The word “unconstrained” that had previously been used had signaled a broader spectrum of potential types of investment instruments than Cambiar wishes to utilize in the management of the Fund. The new name includes the key elements to the Fund’s objective; i.e., investing in companies around the world, and utilizing a fairly concentrated and predominant long-only portfolio construction approach in the pursuit of excess returns.
Bottom-Up vs. Top-Down Investing
One takeaway from 2016 was the extent to which stock prices were buffeted by big picture events that took place around the globe – to the point where company-specific fundamentals were a distant second in importance. Examples included the reach-for-yield trade in the first half of the year, the Brexit event in June, Donald Trump’s victory in November, and the OPEC production cut in December. Although the market’s response to such events moderated as the year progressed, investment manager performance was impacted (to varying extents) by positioning of one’s portfolio going into these episodes.
The Cambiar Global Ultra Focus Fund is predominantly managed using a bottom-up approach; our analysts seek to identify high quality businesses that are nearing an inflection point in their business that we believe is not being recognized or properly valued by the market. This ‘beat to the spot’ approach is based on a rigorous in-house research process. As part of this research effort, the Cambiar team will often consider relevant macro variables that may be a part of a top-down discipline. But the key is the order of the process; i.e., the macro is one factor in the Cambiar buy/sell decision, vs. the macro leading the decision. Perhaps the bigger takeaway for our clients is that Cambiar attempts to take a 360-degree view when evaluating the companies in our portfolio – from both a risk and reward perspective. The bottom-up will almost always trump the top-down, but the objective is to base portfolio decisions on an unbiased assessment on all data that can impact the investment case for our companies.
Global Ultra Focus Fund
The Cambiar Global Ultra Focus Fund closed out 2016 on a strong note, outperforming the market by a wide margin for the fourth quarter. The fourth quarter capped off a fairly tumultuous year for the Fund, with Cambiar struggling in the first two quarters of the year, and then rebounding in the second half of 2016. Given the Fund’s fairly concentrated portfolio, more volatile quarter-by-quarter returns (relative to the index) should be expected. However, there is often a self-cancelling element to the return patterns, as illustrated by the full year 2016 return of the Fund. More importantly, clients should be compensated by the Fund’s higher volatility via outperformance; while Cambiar has been successful in achieving this objective over time, the Fund unfortunately fell short of this goal in 2016.
The Fund’s above-benchmark return in the fourth quarter was primarily a function of stock selection, although low representation in underperforming sectors such as Consumer Staples, Real Estate and Utilities were additional contributors to the Fund’s outperformance. Cambiar has viewed the rally in low volatility stocks with increasing skepticism, given what we viewed to be high valuations assigned to many companies. Continued conviction (i.e., avoidance) on this front paid off in the third and fourth quarters, as these safe haven sectors lagged relative to more cyclical sectors of the market.
Cambiar’s investments in the Consumer Discretionary were a notable bright spot in the quarter, highlighted by the announced takeout of Harman International by Samsung Electronics. While a company’s potential as an acquisition target is not a consideration in the initial investment thesis, acquirers are often attracted to many of the same underlying attributes as Cambiar – strong balance sheets, market-leading positions, and reasonable valuations. Shares of Harman moved higher in response to the offer and Cambiar liquidated the position shortly thereafter.
Representing approximately 17% of the Fund as of December 31st, Financials were the standout beneficiary of the 4Q “Trump Bump”, with many companies in the sector moving higher on the prospects of higher rates, the potential for regulatory/capital relief, and a lower corporate tax rate (with limited tax optimizing strategies, banks would be a big beneficiary on this front). While recognizing that the sector has had a sizable move in a short period of time, a good portion of the rally during the quarter was simply a function of “catch up”, given the negative sentiment toward financials in the first six months of the year. It is Cambiar’s view that the portfolio’s various bank, insurance and credit card companies continue to offer attractive upside potential via a higher earnings trajectory, increased capital return and modest multiple expansion.
Although Cambiar registered solid outperformance across most sectors for the quarter, one exception was Technology, where Cambiar’s holdings were unable to keep pace with the index. Technology also comprised a headwind for the Fund on a full-year basis. Two of the notable underperformers for 2016 (Verifone and Synaptics) remain in the Fund; after a frustrating year with these two positions, we are confident that 2017 should bring improved operating performance – and with it a higher stock price.
On a country/regional basis, the Fund’s relative overweight allocation to U.S. stocks was a positive contributor – given the outperformance of domestic companies vs. their international counterparts. The Netherlands also represents a meaningful allocation in the Fund (~21%) – although this is more a function of global companies maintaining a headquarters in Amsterdam, vs. a bullish call on the Dutch economy.
2016 marks the fourth consecutive year (and six out of seven) in which U.S. stocks have outperformed international equities. This seemingly persistent one-way trade flies in the face of classic diversification tenets, and has likely resulted in a pronounced home country bias in many client portfolios.
Perhaps it is the embedded mean reversion tendencies in us, yet Cambiar is reasonably optimistic about the outlook for international equities in 2017 – on both an absolute basis as well as relative to U.S. markets. While market valuations are approaching cyclical highs in the U.S., international stocks remain reasonably priced relative to forward earnings estimates. Additional tailwinds include improving global growth and steepening yield curves. In our view, the global business cycle has a number of years left to go; if anything, it is probably time for many of the world’s economies to play catch up to the U.S. If we are correct in this outlook, international equity markets should also be poised to outperform.
That being said, we are certainly cognizant of the risks, not only that the global economy disappoints on the growth side and deflationary issues (i.e., falling bond yields) return to the fore, but also that inflation may gather force. This latter scenario would likely require more tightening than expected from the Fed, which together with a strong dollar could cause problems for global equities. It is also important to see some follow-through from international markets on earnings – particularly in Europe. Although Cambiar anticipates solid improvement on this front, failure to produce a meaningful earnings rebound is an additional risk. As always, we are looking first and foremost for compelling investments to own on behalf of our clients; at this juncture, we continue to find abundant opportunities.
The Global Ultra Focus Fund was formerly known as the Cambiar Unconstrained Equity Fund.
Mutual fund investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. The funds may invest in derivatives, which are often more volatile than other investments and may magnify the Fund's gains or losses. Diversification may not protect against market risk. This material represents the portfolio manager’s opinion and is an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice or a specific recommendation of securities.
To determine if a Fund is an appropriate investment for you, carefully consider the Fund’s investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund’s prospectus which can be obtained by clicking here or calling 1-866-777-8227. Please read it carefully before investing. There is no guarantee that the Funds will meet their stated objectives.
Performance data quotes are past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end, please call 1-866-777-8227.
As of 12.31.16, the Cambiar Global Ultra Focus Fund had a 0.0% weighting in Harman International, 0.0% in Samsung Electronics, 4.3% in Synaptic and 4.2% in Verifone.
The Morningstar RatingTM for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. CAMAX was rated against 848 World Stock funds over a three year period and 669 funds over a five year period. With respect to these World Stock funds, CAMAX received a rating of 3 stars for the three year and 4 stars for the five year period, respectively. Past performance is no guarantee of future results.Russell 3000 Index returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index.
P/E ratio 1 YR Forecast is a calculation that divides the current share price by the estimates of earnings in the next four quarters. Debt/Equity - Long Term is a calculation that takes interest bearing, long-term debt divided by shareholder equity. EPS Growth - Long Term is a calculation that takes the company’s estimated profits for five years divided by the outstanding shares. Active share is a holdings-based measure of active management representing the percentage of securities in a portfolio that differ from those in the benchmark index. Alpha is a measure of risk-adjusted performance. Beta is a measure of risk in relation to the market or benchmark. The Sharpe Ratio is a direct measure of reward-to-risk and is calculated by subtracting the risk free rate from the rate of return for a portfolio and dividing the result by the standard deviation. Standard Deviation is a statistical measure of historical volatility; a measure of the extent to which numbers are spread around their average. R-Squared measures how closely a portfolio’s performance correlates with the performance of a benchmark index. These calculations are not a forecast of the Fund’s future performance.
The MSCI World Index is an unmanaged index compiled by Morgan Stanley Capital International. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI indices returns do not reflect any management fees, transaction costs or expenses. The MSCI indices returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index. The Russell 3000 Index returns do not reflect any management fees, transaction costs or expenses. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity markets. Individuals cannot invest directly in the index.
This material represents the portfolio manager’s opinion and is an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice or a specific recommendation of securities.
Cambiar Funds are distributed by SEI Investments Distribution Co., 1 Freedom Valley Dr Oaks, PA 19456, which is not affiliated with the Advisor. Cambiar Funds are available to US investors only. Strategies included within the Institutional Investor offer are not mutual funds and are not affiliated with SEI Investments Distribution Co.