The International Focus Equity strategy seeks to provide long term capital appreciation by investing in equity securities of companies located throughout the world, including both developed and emerging markets, excluding the U.S. The strategy invests in companies which we believe have winning business models, expanding market share, growing end markets and strong management teams; what we collectively call strong ‘Competitive Dynamics’. We believe that the superior sales, profits and cash flows that result from strong Competitive Dynamics drives attractive share price performance and economic value creation. The strategy uses a disciplined risk management process to actively manage and diversify risk exposures (such as currency, market or geography) which permits long-term returns to be predominately driven by bottom-up fundamental stock-picking or stock specific risk.
- High conviction portfolio of 30-70 holdings
- Majority of returns sought from stock selection
- Maximum in a single security: 7.5%
- Sector exposure +/- 10% versus index
- Country Exposure:
- Individual: +/- 10% limit versus the index
- U.S.: +/- 15% limit versus the index
- Non-index countries: min: 0%; max: 2% versus index
- Region Exposure: +/- 15% limit versus the index
The RBC Global Equity team has been managing client money the same way since our foundation in 2006. The investment team enjoys a very strong, collaborative culture based upon teamwork, transparency, alignment and continuous improvement.
The Team believes culture is critical in turning a collection of skilled individuals into a strong team that is committed to making a positive difference for our clients, for investee companies, and for the communities in which we operate.
We believe that over the long-term, investing in great companies at attractive valuations generates value for shareholders that significantly exceeds the return on the average company or the market.
Great businesses create contingent assets based on extra-financial forms of capital. These are often subtle, qualitative characteristics that can take time to be reflected in company financials; characteristics such as sustainable business practices, engaged employees as well as great relationships with suppliers, customers, and the community. Because these do not immediately accrue to the bottom line and are not reflected in typical financial reporting, the market often underappreciates their impact. However, healthy extra-financial capital mitigates risk and creates long-term economic value. We believe that by evaluating the health of extra-financial factors, including environmental, social and governance (ESG), we are not only able to reduce risk and uncover alternative sources of alpha, but also achieve a responsible allocation of capital.
Our Competitive Dynamics framework
We use industry analysis to identify great businesses within their competitive set before assessing them using our Competitive Dynamics framework. We will not invest unless all four criteria are satisfied.
Winning business model
Each business in the portfolio has a unique, hard-to-replicate element that gives it a sustainable edge over its competitors. That element varies from industry to industry, which is why we are structured as a team of industry experts.
Market share opportunity
We pay close attention to the industry structure and nature of competition and expect a company with a true edge over competitors to expand or at least maintain its market share.
We believe that a company with a winning business model able to take market share will amplify the amount of value creation if it is exposed to growing end markets.
Management and ESG practices
We believe investing is not simply renting a share for a period, but taking an ownership stake in a business and accepting the responsibility that ownership entails. We want to partner with responsible management teams who can both operate the business effectively on a day-to-day basis and position it strategically over the long term.
Portfolio construction and risk management
In constructing the portfolio, we use our proprietary risk application in order to analyse the portfolio's risk exposures, enabling us to build-in sufficient diversification for us to capture the stock-specific intended risk sources whilst maintaining a focused portfolio of best ideas. By ensuring the individuality of those best ideas, we maximize diversification of unintended risk exposures and avoid bias-creating concentrations. The result is a portfolio where excess returns are dominated by the investment philosophy and stock-specific risk.