Global Equity

The Cambiar Global Equity strategy is structured as a ‘best ideas’ vehicle, whereby sourcing of new ideas will come from Cambiar’s existing domestic and international portfolios. 

The strategy has the ability to seek investment opportunities from across the globe, making it Cambiar's most diversified product offering.

  • Flexibility to invest in all corners of the world.
  • Equal-weighted approach - All new stock positions enter the portfolio at 2% position sizes. This construction is designed to reduce excessive stock-specific risk, while allowing for the freedom to participate on the upside. 
  • Portfolio will take a broadly neutral weight relative to the U.S. and international exposure relative to the benchmark.
  • The strategy attempts to hold between 45-55 stocks.

Portfolio Managers

AniaA(2016) 

Ania A. Aldrich, CFA 

    

ToddE(2016) 

Todd L. Edwards, PhD 

    

AlvaroS(2016)

Alvaro Shiraishi

Performance Charts

Inception Date: 2.28.1998.  The performance information depicted above represents Cambiar’s Global Equity Composite. Returns are presented gross (g) and net (n) of management fees. Gross and net returns are reduced by transaction expenses. Net returns are also reduced by actual investment advisory fees and other expenses that may be incurred in the management of the account. For the periods of 2013 to the present, the gross returns reflect accounts with both gross and “pure” gross performance. “Pure” gross returns, applicable to SMA portfolios, are not reduced by any expenses, which includes transaction costs, and are provided as supplemental information. Brokerage firms which sponsor SMA fee programs apply bundled fees which may include transactions costs, investment management, portfolio monitoring, consulting services, and in some cases, custodial service fees. Net returns for SMA portfolios are calculated by subtracting actual SMA fees reported by the SMA sponsor. Net of fees performance reflects a blended fee schedule of all accounts within the Global Equity Composite. Cambiar clients and mutual fund investors may incur actual fee rates that are greater or less than the rate reflected in this performance summary. Results are reported in U.S. dollars.
Performance results for the Global Equity Composite are evaluated against the MSCI World Index and MSCI ACWI (All Country World Index). The MSCI World Index is a free float-adjusted, market capitalization weighted index that measures large and mid-cap equity performance across countries with developed markets. The MSCI ACWI is a free float-adjusted, market capitalization weighted index that measures the equity market performance of developed and emerging markets. In 2017, the MSCI World Index was added as an additional benchmark due to Cambiar’s limited emerging markets exposure. Prior to February 2011, the MSCI World Index was the sole benchmark, but it was determined at the time that the MSCI ACWI was a better representation of the holdings and strategy of the composite. The additional benchmark has been added retroactively. The MSCI ACWI and World Indexes are broadly based indices which reflect overall market performance and Cambiar’s returns may not be correlated to either index. The indices assume no management, custody, transaction or other expenses. The MSCI ACWI ‘Since Inception’ performance return presented is based on combined gross and net total returns. The combined performance was calculated by Cambiar using monthly gross total return data for the index for the period since inception in 1998–2000, and monthly net total return data for the index for all periods after 2000. The total return data includes the reinvestment of all income. The gross total return reinvests dividends without deducting withholding taxes. The net total return reinvests dividends after the deduction of withholding taxes (based on a non-resident institutional investor tax rate). The monthly return data used in the calculation of the combined performance was sourced from Morningstar Direct. Cambiar’s performance and the performance of the benchmarks include the reinvestment of all income. Other benchmark returns are net of withholdings taxes. Cambiar typically follows each custodian’s treatment of tax withholding and therefore dividends may be presented as gross or net of dividend tax withholding depending on the custodian’s treatment. Withholding taxes may vary according to the investor’s domicile. Returns include the effect of foreign currency exchange rates obtained from WM/Reuters through IDC. Sources of foreign exchange rates may differ between the composite and the benchmarks. Indices are unmanaged and one cannot invest directly in an index. Past performance is no indication of future results. All information is provided for informational purposes only and should not be construed as an offer to buy or as a solicitation to buy or sell.  Performance is preliminary, please contact us for finalized figures. 

Portfolio Profile (as of 12.31.2017)

Top 10 Holdings % Weight
HSBC 2.4
Alphabet 2.4
Royal DSM 2.3
AIA Group 2.3
Twitter 2.2
Citigroup 2.1
Komatsu 2.1
Baidu 2.1
Bristol-Myers Squibb 2.1
Royal Dutch Shell 2.1
% of Total 22.1
Attributes Cambiar MSCI World MSCI ACWI
Price/Earnings F1Y 15.7 16.9 16.2
Price/Book 2.0 2.4 2.3
Debt/Equity  1.4 1.2 1.1
EPS Growth  10.8 12.9 13.5
Dividend Yield 2.2 2.2 2.2
Market Cap Wtd Avg 85.7 B 135.9 B 131.6 B
Market Cap Median 50.8 B 13.5 B 11.2 B
Active Share 92.4    
Sector Weights   Cambiar      MSCI World MSCI ACWI
Consumer Discretionary 5.9 12.3 12.0
Consumer Staples 11.7 9.0 8.7
Energy 9.6 6.3 6.4
Financials 20.2 18.1 18.7
Health Care 13.4 11.8 10.7
Industrials 13.3 11.6 10.8
Information Tech 14.2 16.8 18.1
Materials 4.4 5.2 5.5
Real Estate 1.8 3.1 3.1
Telecom Services 2.0 2.8 3.0
Utilities 1.9 3.0 2.9
Cash 1.7    
Top 5 Countries     Cambiar MSCI World MSCI ACWI
United States 41.6 58.9 52.0
France 11.9 4.0 3.5
United Kingdom 9.8 6.2 5.5
Netherlands 8.7 1.9 1.7
Japan 8.2 8.9 7.9
Risk Statistics* Cambiar MSCI World MSCI ACWI
Alpha 0.6 0.0 0.0
Beta 1.0 1.0 1.0
R-Squared 87.4 100 98.8
Sharpe Ratio 0.9 0.9 0.9
Standard Deviation 10.8 10.4 10.5
*Three Year      

 

Commentary

Market Review (12.31.2017)

Global equities extended their year-long upward trajectory into the fourth quarter, closing out 2017 at or near their high water marks for the year.  The positive sentiment towards stocks was primarily in response to an accelerating global economy, which bodes well for corporate profits.  U.S. stocks received a boost from the U.S. tax reform bill, which should be an additional tailwind to earnings and provides corporates with more firepower that can be deployed via share buybacks, increased dividends or strategic merger/acquisition activity.    

Posting a full-year return of 25%, the MSCI EAFE Index bested the S&P 500 Index return of 21.8% - marking the first year since 2012 where international developed stocks outpaced their U.S. counterparts.  Emerging markets was the standout performer in 2017, with the MSCI Emerging Markets Index gaining 37%.  While valuation levels have moved higher regardless of geography, international markets may continue to offer a more attractive risk/reward vs. U.S. stocks, based on one-year forward multiples:

Market Index One-Year Forward P/E
S&P 500 18.2x
Nikkei 225 17.5x
FTSE 100  14.7x
DAX 13.4x
CAC 40 14.7x
MSCI Europe 14.9x
MSCI Emerging Markets 12.6x

Source: Factset

Given current valuation levels for U.S. stocks, further upside will primarily be a function of earnings growth, as multiple expansion beyond current levels will be difficult.  In contrast, international markets offer the potential for multiple expansion as well as a continued recovery in earnings.  

Global Equity

The Cambiar Global Equity strategy posted an in-line quarter relative to the strategy’s assigned benchmarks.  While the objective is to outperform both of these indices on a rolling three-year basis, we view the MSCI World Index to be the appropriate performance bogey – given Cambiar’s developed market bias.  The portfolio will selectively participate in emerging markets (EM - currently 6%), but has generally not approached the 12% allocation that EM comprises in the MSCI ACWI. 

The Global portfolio generated a strong absolute return for 2017, but was unable to keep pace with the benchmark for the year.  The relative underperformance was sustained in the first two quarters of the year – which was fairly narrow in scope, and exhibited a strong preference for growth over value.  As the rally in equities broadened in the second half of the year, the Cambiar portfolio fared much better.  Looking ahead to 2018, we believe the portfolio remains attractively valued and diversified at the country/region and sector levels. 

The 4Q gain in global equities was broad-based on a sector level, with utilities as the one exception (posted a small loss for the quarter).  The Global portfolio was paced by positive stock selection in the materials, telecom and industrials sectors.  Energy was another bright spot for Cambiar; after a tough start to the year, energy stocks rebounded in the second half on stronger oil prices. 

Representing approximately 20% of the Global portfolio, Financials remains the largest sector allocation.   Although Cambiar’s holdings posted an in-line performance for the quarter, the sector was a strong contributor for the portfolio in 2017.  Possessing what we feel to be strong capital positions, Cambiar’s bank, insurance and related financials holdings offer a combination of good earnings growth and high dividend yields.  The potential for rising yields in 2018 will be an additional tailwind for many of the portfolio’s spread income businesses. 

As was the case for much of 2017, tech stocks were the top gainers in the fourth quarter.  The Global portfolio’s lower allocation to this top-performing sector (as well as modestly lower returns) was a detraction from performance – for 4Q as well as on a full year basis.  Bright spots in the portfolio included HP Inc. (the printer segment of the former Hewlett Packard) and Baidu.  One name that did not participate in the year was Qualcomm; the stock was down early in the year due to a royalty dispute with Apple before rallying in 4Q on news that Broadcom was interested in acquiring the company.  Cambiar anticipates a stronger 2018 from Qualcomm; the company is laying the foundation for growth outside of smartphones, while the Broadcom offer helps put a floor under the stock.   

Positive stock selection in basic materials and industrials was offset by below-benchmark returns in consumer discretionary and healthcare.  This dynamic was true for the quarter as well as on a full year basis.  Within discretionary, the traditional retail industry continues to face a challenging competitive environment from e-commerce.  While valuations have compressed in the space, Cambiar continues to maintain a fairly cautious outlook.  The portfolio does own a Japanese retailer that we believe has a defensible brand and market position.  As it relates to healthcare, there were no outsized drawdowns from Cambiar’s holdings in the sector.  Rather, the relative underperformance was simply a case of not keeping pace with the benchmark.  We are optimistic that detractors such as Bristol-Myers and Medtronic can deliver improved results in 2018.

As mentioned, Cambiar’s energy positions were a positive contributor in the quarter, but represented a headwind for the portfolio on a full year basis.  The Global portfolio was overweight energy throughout 2017 – not the correct call in hindsight.  Despite the sector’s soft showing in 2017, Cambiar’s continued constructive view towards energy is a function of improving fundamentals in the industry.  U.S. oil inventories continue to decline from their February peak, and OPEC extended their production limits – all of which is helping to bring greater equilibrium to the global oil markets.  At the company level, managements reaffirm their focus on free cashflow and expense discipline.  The result (hopefully) is greater earnings visibility vs. the rollercoaster ride of recent years.   

The Global portfolio held an average cash position of ~4% over the course of the year, creating a drag on return given the strong move in stocks during 2017.  While acknowledging that any cash balance is a negative contributor in a rising market, cash levels are a by-product of the buy/sell process.  As would be expected, cash is a relative non-factor when evaluating performance over longer timeframes.

Looking Ahead

Global equities delivered a dream year for investors – strong returns with very low volatility.  As we contemplate the outlook for equities in 2018, two key considerations are global growth and valuations.  The acceleration in economic growth across most geographies is unlikely to sharply decelerate in 2018, providing a tailwind to corporate profits and stock prices.  That said, it is improbable that 2018 will be without some degree of increased volatility along the way.  Volatility is not necessarily a bad thing – the corresponding increase in dispersion across sectors is beneficial to active managers such as Cambiar. 

Regarding valuation, it is hard to argue that equities in the aggregate are inexpensive.  With that said, it is worth noting that the expansion in multiples has not been uniform – by geography nor by sector.  For example, although U.S. stock averages are at all-time highs, market levels in Japan, the United Kingdom and Europe are still below their 2007 levels (in dollar terms).  Such variances provide an additional opportunity for active managers to outperform.

What unforeseen shocks could derail the upward trajectory for equities?  Geopolitical risk is always front of mind; changes in central bank monetary policy will be another variable worth watching.  Although the three rate increases by the Federal Reserve did little to impede stocks from advancing in 2017, the ongoing normalization in policy will eventually be felt by market participants (particularly those with higher leverage ratios).  And while generally accommodative monetary policy continues in Japan, the European Central Bank is likely to articulate their plan to end quantitative easing at some point in 2018.  The mood at Cambiar is best described as constructive paranoia; while optimistic in the outlook for our companies, we spend equal time thinking about what could go wrong.


Quarterly Top & Bottom Contributors

 

Top Contributors Avg. Weight Contribution Bottom Contributors Avg. Weight Contribution
Komatsu 2.09 0.55 Baidu 2.27 -0.13
Qualcomm 1.98 0.44 Adient 2.01 -0.13
Royal DSM 2.22 0.36 BAE Systems 1.68 -0.15
AIA Group  2.21 0.33 DNB  1.81 -0.16
Tyson Foods 2.01 0.30 CVS Health 0.21 -0.17

A complete description of Cambiar's performance calculation methodology, including a complete list of each security that contributed to the performance of the Cambiar portfolios mentioned above are available upon request. Please contact Cambiar at 1.888.673.9950 for additional information. Past performance is no guarantee of future results.

Disclosure

Certain information contained in this communication constitutes “forward-looking statements”.  Due to market risk and uncertainties, actual events or results, or the actual performance of Cambiar’s client accounts may differ materially from that reflected or contemplated in such forward-looking statements. All information is provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned. There is no guarantee that the opinions expressed herein will be valid beyond the date of this presentation.  There can be no assurance that the portfolio will continue to hold the same position in companies described herein, and the portfolio may change any portfolio position at any time. The specific securities identified and described do not represent all of the securities purchased, sold, or recommended by Cambiar and the reader should not assume that investments in the securities identified and discussed were or will be profitable.