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2011 SMA International Equity Manager of the Year: Thomas White International

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International Equity SMA Manager of the Year Award
Thomas White International
International ADR Strategy

Throughout the month of April, AdvisorOne will focus on separately managed accounts: the money manager options advisors have, the platforms through which they can gain access to those managers, how they can conduct due diligence on those managers, and how advisors are using SMAs in client portfolios.

We begin our coverage by presenting the Investment Advisor-Prima Capital seventh annual Separately Managed Account Managers of the Year. In a feature article in the April 2011 issue of Investment Advisor, seven managers in six different asset classes were chosen as "A Class Apart."

(See the complete calendar of our Special Reportfor past and upcoming coverage.)

In this article, we focus on Chicago- and Bangalore, India-based Thomas White International, winners of the international equity award for its international ADR portfolio.

The philosophy: A research-driven, employee-owned firm that uses a quant system but that can buy and trade ADRs on multiple exchanges around the world.

The portfolio: Searching for undervalued stocks in nearly 50 markets around the world, embracingdiversification to smooth equity performance and reduce volatility.

The performance: 2010 performance (company supplied).

Strategy return (gross): 11.0%

MSCI EAFE index return: 7.8%

S&P 500: 15.06%

Total firm assets under management: $1.43 billion (See firm’s Form ADV.)

Total assets in strategy (3/31/11): $357 million

The people: Investment Advisor Editor John Sullivan spoke in March with Thomas White, chairman, president and CIO. Members of the investment team include: Wei Li, Ph.D., assistant CIO and director of research; David Sullivan II, senior research officer; Douglas Jackman, director of institutional department; John Wu, Ph.D,; Jinwen Zhang, Ph.D., assistant director of research; and Marc Ma, Ph.D., director of research technology.

International Award
Thomas White International
International ADR Strategy

“We really consider ourselves a research firm,” says Tom White, a man who needs little introduction in the separately managed account space, but we’ll do so anyway. The chairman and president of Thomas White International, White has over 40 years of investment experience, beginning in 1966 at Goldman Sachs. Stints as an officer of Lehman Brothers and managing director at Morgan Stanley soon followed, and White founded the firm that bears his name in 1992.

The firm’s international ADR strategy is something that sets it apart, White says. Its research driven approach translates to “people on the ground,” so to speak, most notably with the opening of its office in Bangalore, India.

“We have the capability not only to buy ADRs in many countries, but we often can actually trade securities on their exchanges, which gives our clients a distinct advantage,” White says.

Prima notes that Thomas White was their primary candidate for the 2011 International SMA Award from the beginning, as the firm has the highest aggregate ranking (i.e. sum of the four category scores) of the five finalists. Additionally, the organization has been very stable over the years, has gradually built out retail SMA relationships and continues to execute their well-designed investment process. This was especially the case in 2010, when the portfolio was underweight emerging markets and overweight Japan (i.e. this was non-consensus positioning) and yet still managed to outperform the Index.

“The international ADR strategy is a derivative of the firm’s ordinary share strategy; however, no apologies are necessary as it has performed equally well,” Prima writes. “Our overall opinion of the firm is quite high, particularly in regard to the investment process, the pedigree of the investment team, and the consistency of performance.”

Thomas White International employs a consistent, repeatable process that relies heavily on a quantitative system to rank stocks in deciles among over 100 valuation groups that are based on industries, sectors, regions, countries and combinations thereof, according to Prima. There are qualitative aspects to the process whereby team members analyze each company in terms of its management team, products and accounting quality, thus making the process more balanced than a purely quantitative approach.

Douglas Jackman, executive vice president and chief operations officer, runs the firm on a day-to-day basis. It is employee-owned, a business model Prima favors in its deliberations, and repeatedly White took pains to point to the expertise and performance of the entire team during our interview. The investment team consists of Wei Li, Ph.D.; David Sullivan II; Douglas Jackman; John Wu, Ph.D.; Jinwen Zhang, Ph.D.; and Marc Ma, Ph.D.

(See the complete calendar of our Special Reportfor past and upcoming coverage.)


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