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.