This is the ninth year that Investment Advisor, AdvisorOne and Prima Capital, now Envestnet | Prima, will have researched, nominated and chosen the best separately managed account managers in multiple categories.
Below, we name those strategies, in alphabetical order, chosen as finalists by the 2013 SMA Managers of the Year Awards Committee in the international or global equity category. This year, the winners of the SMA Managers of the Year honors in this category and the others will be celebrated at a live event in Chicago, in online interviews posted to AdvisorOne and in the cover story of the June issue of Investment Advisor.
(See our 2013 SMA Managers of the Year home page for more information on the process, the finalists and, on and after May 1, the winners of this year’s awards.)
Nominee 1: Harding Loevner Global Equity ADR
Harding Loevner has a four-stage investment decision-making process in its global equity strategy, the first of two nominees presented for an SMA Manager of the Year award. The strategy is co-managed by Ferrill Roll, CFA (left) and Alexander Walsh, CFA.
The first stage is the initial qualification for companies for further research. Proposals to include suitable candidates within the universe of non-U.S. stocks are made by global industry sector analysts.
“Analysts focus on 10 factors to qualify a company, which collectively are called the company’s ‘Quality Quotient,’” according to Envestnet |Prima’s analysts in making a recommendation for the strategy to the 2013 Awards Committee. “The quality quotient consists of: threat of new entrants; threat of substitution; buyers’ bargaining power; suppliers’ bargaining power; intensity of rivalry; growth persistence and variability; strength of free cash flow; balance sheet strength; foresight and change management; and corporate governance.”
The firm then performs qualitative assessments of the competitive structure of the industry, and each company’s position within it, by estimating “the durability of margins and growth rate, evaluating the level of business risk, analyzing the risk factors related to domicile of operations, and continual communication with managements prospects and holdings.”
After the qualitative assessments are completed, the analysts perform valuations using projected earnings with the DuPont Model based on the de-composition of return on equity. The analysts also estimate the intrinsic value using the Dividend Discount Model.
The construction of stocks is selected from among the most promising candidates by the portfolio management team. To accomplish this, the team builds unconstrained virtual portfolios from among stocks rated by the analysts.
Comprehensive and repeatable certainly apply to Harding Loevner’s strategy—the reason they made this year’s cut.
Nominee 2: Thomas White International Ltd International ADR
If you say someone or something needs no introduction, you’d better be confident it’s the case. When it comes to Thomas White International, we’re very confident. Tom White, chairman and president of the firm, has more than 40 years of investment experience, beginning in 1966 at Goldman Sachs. Stints as an officer at Lehman Brothers and managing director at Morgan Stanley soon followed, and White founded the firm that bears his name in 1992.
Its international ADR strategy won the category in 2011 SMA Managers of the Year Awards, and is once again nominated this year. What sets it apart, White told us two years ago, is the firm’s research-driven approach, one that translates to having “people on the ground,” 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 added.
“The investment universe includes several international companies,” Envestnet | Prima’s analysts wrote in forwarding the nomination of the Thomas White ADR strategy to the 2013 SMA Managers of the Year Awards Committee. “These stock are divided into approximately 100 valuation groups that include sectors by regions (e.g., Consumer Staples in Europe) and by countries (e.g., Healthcare in Japan). In each valuation group, stocks are placed into deciles based on analytical factors that have been identified by the investment team as having significant predictive power based on results from single-factor models and an optimization process.”
The highest-ranking stocks (top decile) are then analyzed qualitatively by assigned team members to evaluate the quality of each company’s accounting practices, management team, and products. The most attractive stocks from the most attractive valuation groups are then selected for the 50- to 70-stock ADR portfolio.
We invite you to return to the 2013 SMA Managers of the Year home page to read about the finalists in the other three categories, and for additional and ongoing coverage of the winners, beginning on May 1, and the awards ceremony