Since the inception of Bradley, Foster & Sargent, we have purchased and owned international equities for our clients’ portfolios. Historically, these equities have generally been shares of large capitalization, high quality companies – companies that we believe have competitive advantages, great brands and sound business models, good balance sheets, and strong cash flow. International equities in client portfolios have grown to $172 million, as of December 31, 2016. In 2006, we developed a discrete International Equity Strategy, managing portfolios which hold only international equities and emerging market commingled vehicles. Stocks in this discipline are also owned in the equity portion of more broadly-based client portfolios.
Our investment strategy is to seek long term appreciation through growth of principal and income. We seek to preserve capital in times of economic adversity and create wealth in better times by relying on two main principles: identifying high quality international companies and investing at opportune moments.
Portfolios in our International Equity Strategy are built from the bottom-up by portfolio managers using an Investment Committee-managed Guidance List to select equities. To identify high quality international companies, we use the same qualitative and quantitative processes that we use for domestic equities. We seek to purchase equities after an “opportunistic” event has occurred, which often can increase the investment return or lower the risk profile of a given company. Investing in high quality companies at opportune times is a powerful tool we use in striving to meet client objectives.
Although country and portfolio sector weightings are heavily influenced through the process of individual stock selection, our strategy emphasizes broad diversification across industries and companies, as well as countries. In addition, our macro-economic analysis and political risk assessment, as well as our views on the strength of a local currency against the U.S. dollar, will influence portfolio sector weightings. In some countries without clear property rights or the rule of law (such as Russia), we do not invest client assets. In emerging markets, we generally use ETFs, as well as open-end and closed-end funds.
We also work to construct portfolios to dovetail with client-specific needs and restrictions. Portfolio turnover is typically around 30% annually, but can exceed 50% in a year with rapidly changing or unusual economic activity.