The Cambiar Global Equity Fund is structured as a ‘best ideas’ portfolio, whereby sourcing of new ideas will come from Cambiar’s existing domestic and international portfolios.
The Fund has the ability to seek investment opportunities from across the globe, making it Cambiar's most diversified portfolio.
Ania A. Aldrich, CFA
Todd L. Edwards, PhD
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 1.84% (gross); 1.10% (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, 2018. Absent these waivers, total return would be reduced. For performance current to the most recent month-end, please call 1-866-777-8227. The MSCI World and ACWI Index 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 Fund charges a 2.00% redemption fee on redemptions of shares held for less than 90 days.
|Top 10 Holdings||% Weight|
|% of Total||22.4|
|Holdings Subject to Change|
|Attributes||Cambiar||MSCI World||MSCI ACWI|
|Market Cap Wtd Avg||81.7 B||124.5 B||120.4 B|
|Market Cap Median||46.3 B||12.7 B||10.7 B|
|Sector Weights||Cambiar||MSCI World||MSCI ACWI|
|Top 5 Countries||Cambiar||MSCI World||MSCI ACWI|
|Risk Statistics*||Cambiar||MSCI World||MSCI ACWI|
Market Review (9.30.2017)
Global equities closed higher in the third quarter, fueled by encouraging economic growth data and solid corporate earnings reports. On a style basis, growth stocks continued to outpace their value counterparts (particularly in the U.S.), as low bond yields fell for much of the quarter.
International equities are poised to outperform the U.S. markets for the first calendar year since 2012, a trend that may have some legs to it. While valuations have broadly moved higher on a global basis, Cambiar believes that non-U.S. companies are poised to benefit from a combination of continued earnings recovery, multiple expansion and generally accommodative central bank monetary policy. On a regional basis, we believe Europe remains particularly attractive, as the EU shifts from survive to thrive mode (relatively speaking – Europe in general does not possess the same growth rates as the U.S.).
Energy Stocks - Poised for Improved Returns?
After meaningfully lagging the market for the first six months of 2017, energy stocks rebounded in the third quarter. Is the recent recovery the start of an improving performance trend within the sector, or a short-term bounce that is not likely to be sustained? After having maintained an underweight allocation to energy stocks in 2015, Cambiar has been slowly rotating capital back into the sector. At present, our view is that the energy sector offers an attractive risk/reward – based on our outlook for a stable-to-increasing price deck for oil over the next 12 months.
Why did energy stocks struggle in the first two quarters of the year? After posting a sharp rally in the fourth quarter of 2016 on OPEC’s announced production cuts, the energy sector reversed course in January. Climbing global oil inventories led to increased negative sentiment toward the sector – given the oversupplied market conditions. Despite rebounding in September, energy stocks remain in the red on a year-to-date basis. The decoupling in stock valuations relative to oil prices thus far in 2017 borders on capitulation by investors (see chart).
Source: Bloomberg. WTI (West Texas Intermediate)
Frustration with the pace of the recovery in the current oil market vs. past cycles is sure to be weighing on investor sentiment; that said, we believe the combination of attractive valuations (in what is increasingly becoming a fully/overvalued equity market) and improving fundamentals may result in brighter days ahead for energy stocks.
As with most assets, the oil price is primarily a function of supply and demand. Global oil demand has been strong this year, with industry publications continuing to revise their demand estimates higher. On the other hand, global oil supply growth has not kept pace with demand due to OPEC production cuts as well as underinvestment in many areas of the world outside of the United States.
While the current supply/demand picture is healthy, the spike in oil in storage during the 2014-2016 timeframe resulted in a glut of oil and oil products in storage. As the chart illustrates, U.S. oil inventories have begun to post consistent draws - which essentially means the global oil market is not just back in balance but is actually under-supplied. While there is some work to do in working down the supply bulge and reaching more normal storage levels in the U.S. (~700K barrels), the data is moving in the right direction.
A continued overhang in the bull case for energy stocks is the role of shale production in North America (N.A.); i.e., any uptick in oil prices will result in increased shale activity, thereby capping oil price gains. Yet can N.A. shale fill the potential gap that may occur from lack of new investment in conventional oilfields? Expenditures in new oil finds have been sharply curtailed since the collapse in oil prices three years ago. From our analysis, the big integrated and national oil companies are instead seeking to squeeze more out of their existing assets – which will succeed in providing barrels in the short-term, but at the expense of increasing decline rates. When comparing the barrels lost via a 5% decline rate vs. the incremental shale production estimates, one can create a scenario where shale is a necessary source of supply, vs. the burden tagline that it wears today.
Uncertainties regarding the pace of the recovery remain; however, Cambiar believes these concerns are reflected in the attractive valuations that exist within the sector. Cambiar’s holdings in the sector span the energy stack, including integrated oil companies, exploration and production companies and oil services companies. Many of these companies have undergone significant restructuring – such that improving top-line results have the potential for a disproportionately positive impact on earnings.
Global Equity Fund
The Cambiar Global Equity Fund posted a strong third quarter – on an absolute basis as well as relative to the benchmarks. Although the Global strategy trails the benchmarks on a year-to-date basis, we are encouraged by the positive turn we saw in the portfolio during 3Q. Trade activity during the quarter was modest, with five purchases and three sales. The Global portfolio ended the quarter with a 42% U.S./58% non-U.S. allocation. Europe represents the largest portion of the portfolio’s international exposure, followed by Emerging Markets and Japan.
On an attribution basis, the excess return (vs. the MSCI World) in the quarter was broad-based in nature, with the portfolio garnering positive effects via stock selection or over/underweight allocations in 9 of 11 sectors in which it was invested. The largest detractor in the quarter was a modest cash balance of ~5%, which was a 25 basis points drag on return.
Cambiar’s consumer discretionary positions comprised the top contribution to performance in the quarter, led by Hugo Boss and Adient. The investment thesis for Hugo Boss was predicated on brand realignment and operational restructuring; while we remain constructive on the company’s prospects, the stock reached our price target and was subsequently liquidated in the quarter. Adient is a manufacturer of seats and related components for the auto industry and has a strong reputation (According to Adient, one in every three seats in the world is produced in their facilities). The stock moved higher in the quarter on disclosure of an activist investor taking a position in the company. While unsure what an activist has planned for a company that has been public for less than a year (Adient was formerly part of Johnson Controls), Cambiar still views Adient to represent an attractive risk/reward opportunity – the recent move notwithstanding.
The portfolio also benefitted from strong stock selection in financials; Cambiar’s bank and insurance positions have also outperformed the MSCI World on a year-to-date basis. The re-rating in financials has primarily been in response to better-than-expected profitability; although bond yields have remained flattish for most of 2017, financials have done a good job managing expenses and growing revenues via higher lending activity as well as non-credit segments of their business. With many of the portfolio’s holdings trading at reasonable price-to-book multiples and offering attractive capital returns via dividends and share buybacks, Cambiar remains constructive on our holdings in this sector.
Another bright spot for the portfolio during the quarter was consumer staples. Valued by investors for their perceived lower volatility profiles, steady dividends and consistent sales trends, the sector incurred a modest pullback during the third quarter. Some of the decline was due to a sell-off in tobacco stocks, which sold off on news of a possible proposal by the U.S. FDA to cut nicotine in cigarettes. Cambiar was able to counter weakness in the staples sector with positive returns from holdings such as Ambev and Tyson Foods.
Cambiar’s energy positions rebounded in tandem with oil prices moving higher during the quarter. Despite the 3Q lift, energy is the only blemish in what has been a broad-based rally in stocks this year. The stabilization in oil prices has primarily been a function of U.S. inventories beginning to see consistent drawdowns; should this trend continue, it could bode well for sentiment and price action within the sector. Energy represents approximately 9% of the Global Equity Fund as of quarter-end.
As mentioned, the Global Equity portfolio was negatively impacted by a cash position that was maintained throughout the quarter; additional detractors included Japanese real estate company Mitsubishi Estate and China Mobile in the telecom sector; resulting in both sectors lagging during the period.
Global equities have broadly rallied through the first nine months of 2017, with stock averages in the U.S., Japan, Europe and Emerging Markets all trading at 52-week highs. Given positive economic growth data, low volatility, strong corporate profits and lack of attractive investment alternatives, equities appear to be the best house on the block. Although Cambiar remains optimistic as it relates to our companies, we spend equal amounts of time thinking about what could impair the investment case. Complacency and investing are not a good mix.
As always, Cambiar continues to focus the core of our research on company-specific fundamentals. We will also include macro variables into our analysis, to the extent it is relevant to our bottom-up work. One segment of the market we are monitoring is central bank activity, in particular the U.S. Federal Reserve. The U.S. continues to slowly make progress on normalizing monetary policy; the key consideration is whether the markets will be able to digest higher rates, given the absence of inflation. The moves made by the U.S. Fed have a ripple effect on other markets – potentially jeopardizing what has been a synchronized global growth environment. We are also closely monitoring the energy markets, given the high correlations between oil prices and stock movements over the long-term within the sector.
Mutual fund investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, investments in small companies typically exhibit higher volatility. 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. 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. CAMGX was rated against 703 World Large Stock funds over a three year period and 583 funds over a five-year period. With respect to these World Large Stock funds CAMGX received a rating of 2 stars for the three year and 3 stars for the five year period, respectively. Past performance is no guarantee of future results.
Price/Earninngs 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 World and ACWI index are an unmanaged index compiled by Morgan Stanley Capital International. 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. Individuals cannot invest directly in an Index.
As of 9.30.17 the lobal Equity Fund had a 2.1% in Adient, 2.1% in Ambev, 0.7% in China Mobile, 0.0% in Hugo Boss, 14% in Mitsubishi Estate, and 1.9% in Tyson Food. Current and future holdings subject to 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.
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.