The World Is Your Oyster

Current valuations and a broad opportunity set make a compelling case for international equities.


Sources: MSCI, Dow Jones, FactSet as of December 31, 2018. Please see the bottom of the page for definitions. Past performance is no guarantee of future results.

International markets offer a large and “inefficient” opportunity set

Opportunity set is dramatically larger

Over 60% of the world’s stock market capitalization consists of non-U.S. companies 1

Foreign firms dominate many industries, demonstrated by the following representation of non-U.S. companies within industry rankings—banks: 10 of top 15, metals and mining: 12 of top 15, airlines: 11 of top 15, automobiles: 12 of top 15, diversified telecommunication services: 12 of top 15 and pharmaceuticals: 8 of top 15 2

International markets are “inefficient”—an experienced manager may add value

  • With a large number of foreign issuers and lower analyst coverage than for U.S. stocks, 3 selecting strong international companies to invest in requires particular expertise
  • A manager with deep experience in international stock investing may be well positioned to add value through careful company analysis, stock selection, sector weighting and regional positioning

 

1 Source: FactSet Market Aggregates as of June 30, 2018.

2 Source: MSCI All Country World Index, ranked by index weight as of June 30, 2018.

3 Source: FactSet as of December 31, 2018.


Price/Earnings (P/E): 
The ratio for valuing a company that measures its current share price relative to its per-share earnings. 
Price/Book: The ratio used to compare a stock's market value to its book value.  
Price/Cash Flow: The ratio of a stock’s price to its cash flow per share.  
Dividend Yield: A financial ratio that indicates how much a company pays out in dividends each year relative to its share price. Dividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stock. 
Earnings Per Share (EPS): The portion of a company's profit allocated to each outstanding share of common stock.  
Long-term Debt/Capital: A ratio calculated by taking the company's debt, including both short- and long-term liabilities, and dividing it by the total capital. Total capital is all debt plus shareholders' equity, which may include items such as common stock, preferred stock and minority interest.

Consider: Renaissance International Equity Strategy

Highlights

  • Seeks to deliver value to investors through proprietary quantitative modeling and bottom-up fundamental analysis
  • With a growth-oriented style, the strategy targets companies that have shown strong and consistent earnings growth
  • The strategy’s flexible, all-cap mandate invests in both emerging and developed markets

 

Disciplined, repeatable investment process—the “art & science” of international investing

With a “growth at a reasonable price” (GARP) style, the strategy targets companies that have shown strong and consistent earnings growth that trade at attractive valuations.

Chart is for illustrative purposes only and is not drawn to scale.
1 U.S. traded shares of foreign companies.

Renaissance International Equity Strategy annualized returns, wrap composite (%) (as of 12/31/18)

 

3Q18

1 Yr

3 Yr

5 Yr

10 Yr

15 Yr

20 Yr

Since Incpt. (07/01/94)

Gross

-16.6

-19.2 0.7 -0.4 6.5 7.3 6.8 7.5
Net

-17.2

-21.6

-2.3

-3.4

 

3.4

4.1

3.6

4.4
MSCI All Country World Index ex USA1

-11.5

-14.2

4.5

0.7

6.6

5.2

4.2

4.8

Source: Renaissance Research, Bloomberg, MSCI.
1 Primary benchmark.

All references to Renaissance composite performance in this presentation are net of fees unless otherwise stated. Past performance is not indicative of future results. Performance for periods of less than a year is not annualized. All returns are shown in U.S. dollars. Total annual fees charged by wrap sponsors familiar to RIM are generally in the range of 0.75% to 3%. Accordingly, RIM assumes a 3% total wrap fee when calculating net returns. Please refer to the full composite presentation and GIPS disclosure on the last page for additional information, including the calculation of net-of-fees performance.

Why Renaissance Investment Management?




Meet the Portfolio Manager

Joe G. Bruening, CFA
Senior Partner

Joe joined Renaissance in 1998 and is the lead portfolio manager for the firm’s international equity portfolios. Prior to assuming his current portfolio management duties, Joe served as a Securities Trader, a role in which he had 10 years' prior experience as a trader at Fifth Third Bank. In November 2000, Joe was promoted to Vice President, was made a Partner in 2003, and most recently a Senior Partner in 2010. Joe holds a Master of Business Administration from Xavier University and is a cum laude graduate of the University of Cincinnati, where he received his Bachelor’s Degree in Finance and Real Estate. He is a member of the CFA Institute and the CFA Society of Cincinnati.

About Renaissance

Founded in 1978, Renaissance Investment Management is a registered investment adviser based in the Greater Cincinnati Ohio area. The firm serves both institutional and high-net-worth clients and offers a variety of investment management strategies based upon a foundation of intensive research and disciplined, process-oriented decision-making. Renaissance is a multi-discipline firm offering domestic and international investment strategies.

GIPS Compliant Presentation: International Equity Wrap Composite

1 For period July 1, 1994 through December 31, 1994.
2 Beginning January 1, 2006, "pure" gross-of-fees returns do not reflect the deduction of any expenses, including trading costs as these are wrap accounts. "Pure" gross-of-fees returns are supplemental to net returns. From July 1, 1994 through December 31, 2005, the disclosed returns are presented gross of fees as these are institutional accounts.
3 Not meaningful figure due to five or fewer accounts invested for the entire year.
4 Firm Assets do not include UMA program assets for GIPS purposes. As of 12/31/2018, Renaissance managed an additional $2,157.0 million in UMA programs, totaling $4,199.2 in assets under management and shown as supplemental information to the GIPS compliant presentation.

Renaissance Investment Management (RIM) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Renaissance has been independently verified for the periods January 1, 2006 through June 30, 2017.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The International Equity ADR Wrap Composite has been examined for the periods January 1, 2006 through June 30, 2017. The verification and performance examination reports are available upon request.

Firm Definition: The Renaissance Group LLC, which does business as Renaissance Investment Management (RIM), is a registered investment advisor established in 1978, with an office in Covington, KY. RIM is an affiliate of Affiliated Managers Group based in West Palm Beach, FL. RIM manages equity, tactical, balanced and fixed income assets for a variety of clients including high net worth, institutional and sub-advisory relationships. A complete list and description of the Firm’s composites is available upon request.

Composite Composition: The International Equity ADR Wrap Composite portfolios consist of approximately 50-60 equities exhibiting a combination of strong earnings growth, reasonable valuation, rising earnings expectations and profitability. The initial universe begins with all American Depositary Receipts (ADRs) and U.S. listed foreign corporations. RIM created the International Equity ADR Wrap Composite as of January 1, 2006 to include the historical fee paying, fully discretionary, non-tax managed, non-wrap International Equity ADR account returns from our International Equity ADR Institutional Composite from its inception on July 1, 1994 through December 31, 2005. From January 1, 2006 to present, the International Equity ADR Wrap Composite includes all International Equity ADR fee paying, fully discretionary, non-tax managed, direct-managed accounts with wrap fee arrangements and fee paying SMA accounts that adhere to the SMA sponsor’s inclusion guidelines. RIM does not have non-fee paying portfolios. RIM will add new fully discretionary wrap portfolios to the composite when they become fully discretionary based on the policies governing composite construction. RIM will exclude terminated portfolios from the composite after the last full month they were under management. Composite dispersion is measured using an asset-weighted standard deviation of returns of the portfolios. As of July 1, 2017, the International Equity Wrap Composite has been renamed the International Equity ADR Wrap Composite.

Calculation of Performance Returns: Performance is calculated using total returns. Monthly composite performance is asset-weighted using beginning-of-period values. Rates of return are time-weighted with geometric linking of monthly returns. Valuations and returns are computed and stated in U.S. dollars. Account performance is based on total assets in the account, including cash and cash equivalents. Performance is actual performance.

RIM has chosen to present performance for pure gross-, gross- and net-of-fees. The pure gross-of-fees performance returns are presented before management and custodial fees and all trading expenses. The gross-of-fees performance returns are presented before deductions of management and custodial fees but after the deduction of all trading expenses. The net composite performance returns prior to December 31, 2005 are presented after deducting a model fee of 300 basis points from the gross return, which is the highest wrap fee represented by the composite. The net composite performance returns after December 31, 2005 are presented after deducting a model fee of 300 basis points from the pure gross return. Wrap fees, and fees in lieu of commissions, vary across brokerage firms and accounts based upon account size and other factors. The various bundled fees may include trading, management, custodial expenses and other administrative fees depending upon the wrap program selected. These pure gross-, gross- and net-of-fee investment results for the Renaissance International Equity ADR Wrap Composite include reinvestment of dividends and other earnings. Clients’ returns will be reduced by the advisory fee and any other expenses that may be incurred in the management of the client’s investment advisory account. For example, if the gross annualized return of an account over a five-year period were 5.0%, deducting one twelfth of an annual advisory fee of 90 basis points each month on the ending monthly account balance would produce a cumulative net return of 22.7%. The cumulative gross return at 5.0% per annum over a five-year period would be 28.3%. A $1 million starting portfolio would thus have an ending net market value of $1,227,096, $56,262 less than the gross return ending value of $1,283,359. There is no minimum asset size for inclusion in the composite. RIM uses trade date accounting and income is accrued. Actual performance may differ from composite returns, depending on the size of the account, brokerage commissions, investment guidelines and/or restrictions, inception date and other factors. After-tax results will vary from the returns presented herein for those accounts

that are subject to taxation. Policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request.

Standard Deviation: The three-year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. According to the GIPS Standards, this is not required for periods prior to 2011.

Investment Management Fees: Wrap fees, and fees in lieu of commissions, vary across brokerage firms and accounts based upon account size and other factors. Wrap fee schedules are provided by independent wrap sponsors and are available upon request from the wrap sponsor. Total annual fees charged by wrap sponsors familiar to RIM are generally in the range of 0.75% to 3.00%.

Benchmark: RIM compares its composite returns to the MSCI All Country World ex USA. The MSCI All Country World ex USA Index (net of foreign withholding taxes) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets, excluding the United States. The index consists of approximately 1800 securities from 45 countries. This index is shown for comparison purposes only. We are not trying to explicitly manage to this benchmark. This index represents unmanaged portfolios whose characteristics differ from the composite portfolios; however, it tends to represent the investment environment existing during the time periods shown. This index cannot be invested in directly. The returns of this index do not include any transaction costs, management fees or other costs. The holdings of the client portfolios in our composites may differ significantly from the securities that comprise the index shown. The index has been selected to represent what RIM believes to be an appropriate benchmark with which to compare the composite performance.

Other: Performance data quoted in any Renaissance presentation represents historically achieved results, and is no guarantee of future performance. Future investments may be made under materially different economic conditions, in different securities and using different investment strategies and these differences may have a significant effect on the results portrayed. Each of these material market or economic conditions may or may not be repeated. Therefore, there may be sharp differences between the performance shown and the actual performance results achieved by any particular client. The value of an investment may fall as well as rise. Please note that different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Investor principal is not guaranteed and investors may not receive the full amount of their investment at the time of sale if asset values have fallen. No assurance can be given that an investor will not lose invested capital. Consultants supplied with these performance results are advised to use this data in accordance with SEC guidelines. The actual performance achieved by a client portfolio may be affected by a variety of factors, including the initial balance of the account, the timing and amount of any additions to or withdrawals from the portfolio, changes made to the account to reflect the specific investment needs or preferences of the client, duration and timing of participation as a RIM client, and a client portfolio’s risk tolerance, investment objectives, and investment time horizon. All investments carry a certain degree of risk, including the loss of principal and are not guaranteed by the U.S. government.

Risks of International Equity ADR Strategy: International Equity ADR Wrap Composite returns may show a high level of variability. In addition to market risk, the majority of any additional risk in these portfolios is related to specific stock selection, and RIM will have significant exposure to individual securities.

Sources: Sources:  MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.

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About Renaissance Investment Management

Renaissance Investment Management Logo

Founded in 1978, Renaissance Investment Management is a registered investment advisor based in the greater Cincinnati, Ohio area. The firm serves both institutional and high-net-worth clients and offers a variety of investment management strategies based upon a foundation of intensive research and disciplined, process-oriented decision making. Renaissance is a multidisciplinary firm offering domestic and international investment strategies.

Learn More About The Firm
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