|Minimum Investment||$2,500||$5 million|
The Cambiar International Equity Fund is designed to identify compelling international investment opportunities that possess the desired combination of attractive valuations and potential for multiple expansion. The starting universe for the International Equity Fund includes any international company with a market cap above $5 billion.
Cambiar’s quality and value bias will result in portfolio overweight to developed markets, subsequent underweight in emerging markets.
Jennifer M. Dunne, 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. The performance data quoted for periods prior to September 9, 2002 is that of the Cambiar International Equity Trust, a similarly managed Fund. This Fund was not registered under the Investment Company Act of 1940. If the Fund had been registered, performance may have been lower. Investor Share Class: Expense ratio is 1.13% (gross); 1.06% (net). Institutional Share Class: Expense ratio is 1.03% (gross); 0.96% (net). Cambiar Investors, LLC has contractually agreed to reduce fees and reimburse expenses in order to keep net operating expenses from exceeding 0.95% of the average daily net assets of each of the Fund’s share classes until September 1, 2017. Absent these waivers, total return would be reduced. For performance current to the most recent month-end, please call 1-866-777-8227. MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. & Canada.
The Fund charges a 2.00% redemption fee on redemptions of shares held for less than 90 days.
|Top 10 Holdings||% Weight|
|Royal Dutch Shell||3.3|
|% of Total||29.7|
|Holdings Subject to Change|
|Attributes||Cambiar||MSCI EAFE||MSCI ACWI ex U.S.|
|Market Cap Wtd Avg||54.6 B||53.8 B||53.0 B|
|Market Cap Median||26.8 B||8.9 B||7.1 B|
|Sector Weights||Cambiar||MSCI EAFE||MSCI ACWI ex U.S.|
|Top 5 Countries||Cambiar||MSCI EAFE||MSCI ACWI ex U.S.|
|Risk Statistics*||Cambiar||MSCI EAFE||MSCI ACWI ex U.S.|
Market Review (12.31.2016)
Global equity markets posted mixed returns for the final quarter of 2016. U.S. stocks were the bright spot in the quarter, as investors reacted positively to the pro-growth agenda put forth by the 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 -4.2%. Despite their 4Q setback, EM stocks were one of the top-performing markets (outside of the U.S.) in 2016; top EM contributors were Brazil and Russia. One non-U.S. market that was positive for the quarter was Japan, as a stronger dollar/weaker yen was viewed as supportive for Japanese stocks. Japanese equities have rebounded strongly in the second half of 2016, after struggling for the first six months of the year. Cambiar’s International and Global Funds have varying allocations to Japan – mostly a function of the opportunity set and relative risk/reward for the underlying investment strategy.
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, 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. Given the event-driven year that was 2016, Cambiar’s view on bottom-up vs. top-down investing is a timely discussion.
The Cambiar International and Global Equity Funds are 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. Where relevant, it is Cambiar’s preference for macro factors to have a positive (or neutral) impact to the investment case; e.g., a higher oil price deck will be a positive for the strategies’ energy holdings, just as steepening yield curves will be beneficial for many of our financial positions. A change in the macro can also be a negative leading indicator; the precipitous drop in oil prices during the second half of 2014 was a red flag for a related decline in margins/earnings within the sector.
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 the companies.
International Equity Fund
The Cambiar International Equity Fund closed out 2016 on a positive note, outpacing the strategy’s assigned performance indices. The relative outperformance for the quarter enabled Cambiar to narrow the deficit vs. the benchmarks for the year, and we hope to continue this momentum into 2017. Given the strategy’s somewhat benchmark-agnostic approach, the International Equity Fund should not be expected to perform in lockstep with the market. That said, the objective is for these deviations to generate positive excess returns for our clients over a market cycle. As the longer-term performance numbers illustrate, the strategy has been successful in this regard.
Trade activity was elevated in the quarter – a function of stock-specific developments, reduction of portfolio cash levels, and more closely aligning the portfolio to the team’s in-house view on global growth trends and bond yields. Cambiar was a net buyer in Financials and Industrials, while reducing portfolio allocations to Health Care, Telecom and Technology. The result of the team’s buy/sell activity in the quarter is a modest cyclical tilt within the portfolio. On a country/regional basis, Cambiar increased the portfolio’s exposure to Japan in the quarter, ending the quarter with an approximate 20% allocation (vs. 25% for the EAFE Index). The Netherlands also represents a meaningful allocation in the portfolio (~20%) – although this is more a function of global companies such as Airbus and Royal Dutch maintaining a headquarters in Amsterdam, vs. a bullish call on the Dutch economy.
Strong stock performance within Financials was a notable contributor to performance in the quarter. Cambiar’s European bank holdings staged an impressive rebound in the second half of 2016 after a challenging first six months of the year. As discussed in our 3Q commentary, coordinated action amongst central banks that began in the summer has contributed to rising yields – a powerful tailwind for the banks. Despite the second half improvement in valuations, Cambiar believes many of the Fund’s financial companies to be in the early innings of a longer-term investment opportunity. Catalysts include higher earnings, strong capital return via dividends/share buybacks, and incremental multiple expansion.
Cambiar’s holdings in the Industrial sector were another bright spot for the portfolio – both in the quarter as well as on a full year basis. With an emphasis on diversification by way of regional footprint and end market, Cambiar has identified a number of industrial companies that are market leaders in their industry, have traded at attractive valuations and are poised to deliver higher earnings over a forward 1-2 year timeframe. Examples include an aerospace OEM, commercial infrastructure contractor, professional staffing company and a global mail/logistics company.
The Energy sector was boosted by the announced production cut by OPEC (and some non-OPEC producers) – a fairly significant moment in the history of OPEC. The combination of solid global demand and compliance of agreed-upon cuts should help to bring equilibrium to the oil markets – and although a significant hike in oil prices is unlikely, it is not necessary for the stocks to work, given the restructuring and related capex/expense reduction initiatives that many of these companies have implemented over the past two years. On a full-year basis, the Energy sector completed a worst-to-first move from 2015 to 2016. The Cambiar International Equity Fund benefited from an overweight allocation to the sector, ending the year with an approximate 9% allocation (vs. 5% for the benchmark).
In a continuation of trend from the third quarter, sectors that are negatively correlated to interest rates underperformed in the quarter; examples here include Utilities, Telecom and Real Estate. Cambiar outperformed in Real Estate via an investment in a Japanese property company; however, the portfolio’s holdings in Utilities and Telecom were a drag on performance. While allocation to these sectors was reduced in the quarter, Cambiar continues to maintain some exposure – as these companies’ more defensive characteristics offer prudent ballast vs. the portfolio’s cyclical holdings.
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, a 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.
Mutual fund investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, investments in 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. Emerging markets involved heightened risks related to the same factors as well as increased volatility and lower trading volume. The Cambiar International Equity Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund's gains or losses. There can be no assurance that the Fund will achieve its stated objectives.
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.
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. The Cambiar International Equity Fund Investor Class was rated against 606 Foreign Large Blend funds over a three year period, 542 over a five year period and 329 over a ten year period. With respect to these Foreign Large Blend funds The Cambiar International Equity Fund Investor Class received a rating of 4 stars, 4 stars, and 4 stars respectively. Past performance is no guarantee of future results.
Price/Earnings F1Y 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 EAFE® Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. & Canada. The MSCI All-Country World and World Indices are unmanaged indices 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 MSCI indices returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an 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.