Chautauqua International Growth Strategy

OVERVIEW

The Chautauqua International Growth Strategy invests in equity securities of non-U.S. companies with large market capitalizations. The strategy will normally be diversified among at least three countries. The strategy invests primarily in developed markets but may invest in emerging and less developed markets. The portfolio contains high-quality companies that employ better governance and disclosure, more conservative accounting, less financial leverage and “best-in-class” management. This reduces the risk of negative surprises and mitigates the risk of loss, which is a primary concern. In addition to generating high risk-adjusted returns, the approach creates upside market participation and downside protection.

Portfolio Construction

  • Concentrated portfolio of generally 25–35 stocks
  • Positions are typically 1%–6% at the time of purchase
  • Market caps in excess of $5 billion at the time of purchase
  • Sector weights limited to 50% of portfolio
TEAM

For more information, contact David Lubchenco or the Intermediary Specialist in your region.

COMMENTARY

Q3 2017 International and Global Growth Equity Strategies

Global markets continued to melt up in the third quarter, shrugging a temporary "risk off" period in early August and then enjoying a broad-based rally through the end of the quarter. In general, large capitalization growth stocks moved higher throughout the quarter, but the market leadership changed in September with a big rally in small capitalization value stocks. The market action has been buoyed by strong economic growth and generally positive central bank commentary in all the major economic regions (i.e. U.S., E.U., and Japan). Together these have overshadowed the impacts from natural disasters, the threat of nuclear exchange between the U.S. and North Korea, confoundingly low infation, and ever-higher valuations of financial asset.s

We invest in growing businesses that benefit from secular growth trends and possess sustainable competitive advantages which allos them to earn high returns on capital, and in turn reinvest into their businesses and keep growing,. Typically, our portfolio companies deal in mission-critical or value-added products and services, and these tend to lead in demand during periods of coordinated global growth.

But to our thinking, risks have increased. The biggest risk is the unwinding of expansive monetary policies, which have been exemplary for both size and the amount of time they have been applied in the global financial systems. As a result, valuation multiples in the equity markets (and generally in all financial assets) have reached levels that are both historically and absolutely expensive. The other big risk is the enormous presence of value-agnostic entities in the markets (e.g. ETFs, algorithmic traders), which is somewhat of an “X factor” that could contribute to disorder in the markets. Accordingly, we have made meaningful adjustments to our portfolios to protect on the downside of such events, such as de-emphasizing stocks with higher beta and higher valuation relative to their underlying business fundamentals, and also reducing less liquid stocks. Further, we also raised our cash positions in order to mitigate the harm from a sell-off and to redeploy where we may find valuation anomalies.

Read Full International and Global Commentary