Seeking value primarily in the non-US developed markets

The International Value Select portfolio is constructed from an equity universe composed of companies with market capitalizations typically greater than $5 billion located in non-US developed and emerging market countries. The strategy uses our international value equity strategy with two distinctions: the select portfolio has greater liquidity (by way of investing in larger capitalization companies) and fewer holdings. We believe that concentrating the holdings can compensate for the loss of small/mid cap exposure. The investment process comprises three stages: quantitative screening and initial analysis, fundamental research, and portfolio construction.

Benchmark
MSCI EAFE
Inception
March 31, 2005
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Strategy overview

The portfolio managers discuss our International Value Select strategy.

Portfolio managers

Fundamental Portfolio Manager
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Chief Executive Officer
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager

Performance

QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -7.6%6.2%6.2%8.6%8.7%7.0%7.0%
Strategy (net) -7.7%5.8%5.8%8.3%8.3%6.6%6.5%
MSCI EAFE -8.1%4.3%4.3%2.2%5.2%5.7%5.4%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -7.6%6.2%6.2%8.6%8.7%7.0%7.0%
Strategy (net) -7.7%5.8%5.8%8.3%8.3%6.6%6.5%
MSCI EAFE -8.1%4.3%4.3%2.2%5.2%5.7%5.4%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -7.6%6.2%6.2%8.6%8.7%7.0%7.0%
Strategy (net) -7.7%5.8%5.8%8.3%8.3%6.6%6.5%
MSCI EAFE -8.1%4.3%4.3%2.2%5.2%5.7%5.4%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -7.6%6.2%6.2%8.6%8.7%7.0%7.0%
Strategy (net) -7.7%5.8%5.8%8.3%8.3%6.6%6.5%
MSCI EAFE -8.1%4.3%4.3%2.2%5.2%5.7%5.4%
Fund 2024202320222021202020192018201720162015201420132012201120102009
Strategy (gross) 6.2%29.5%-6.7%10.4%6.9%21.2%-17.2%29.5%1.5%-1.3%-4.3%27.2%24.7%-9.6%13.2%35.4%
Strategy (net) 5.8%29.1%-7.1%10.0%6.5%20.8%-17.5%29.1%1.1%-1.7%-4.7%26.8%24.3%-9.9%12.7%34.8%
MSCI EAFE 4.3%18.9%-14.0%11.8%8.3%22.7%-13.4%25.6%1.5%-0.4%-4.5%23.3%17.9%-11.7%8.2%32.5%
Strategy (gross)
Strategy (net)
MSCI EAFE
2024202320222021202020192018201720162015201420132012201120102009
6.2%29.5%-6.7%10.4%6.9%21.2%-17.2%29.5%1.5%-1.3%-4.3%27.2%24.7%-9.6%13.2%35.4%
5.8%29.1%-7.1%10.0%6.5%20.8%-17.5%29.1%1.1%-1.7%-4.7%26.8%24.3%-9.9%12.7%34.8%
4.3%18.9%-14.0%11.8%8.3%22.7%-13.4%25.6%1.5%-0.4%-4.5%23.3%17.9%-11.7%8.2%32.5%

Portfolio (as of December 31, 2024)

Benchmark: MSCI EAFE
Asset Allocation
Strategy
Stocks 99.1%
Cash 0.9%
Strategy Characteristics
Strategy Benchmark
No. of holdings 64 722
Weighted avg. market cap (US $MM) $63,250 $73,890
FY2 price/earnings 11.7 13.6
Price/book value 1.5 1.9
Dividend yield (%) 3.0 3.1
TOP 10 HOLDINGS
Security Country Percent
Alstom SA France 4.5%
Barclays PLC United Kingdom 4.1%
Kering SA France 4.0%
Rolls-Royce Holdings Plc United Kingdom 3.8%
Reckitt Benckiser Group Plc United Kingdom 3.5%
Samsung Electronics Co., Ltd. South Korea 3.3%
Renesas Electronics Corp. Japan 3.0%
AstraZeneca PLC United Kingdom 3.0%
Canadian Pacific Kansas City Ltd. Canada 2.9%
Akzo Nobel Netherlands 2.7%

A “weighted average” measures a characteristic by the market capitalization of each stock. Price/book ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The price/earnings ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. The FY2 P/E ratio is a forward P/E ratio using a next-twenty-four months EPS estimate in the denominator.

Holdings are subject to change.

SECTOR WEIGHTS
Sector Strategy Benchmark
Financials 18.3% 21.9%
Industrials 17.8% 17.8%
Information Technology 14.3% 8.8%
Health Care 12.9% 12.4%
Consumer Staples 11.8% 8.3%
Consumer Discretionary 7.5% 11.3%
Materials 5.6% 6.1%
Communication Services 4.5% 4.8%
Utilities 2.9% 3.2%
Energy 2.4% 3.5%
Real Estate 1.2% 2.0%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 31.8% 14.9%
France 19.8% 11.1%
Japan 11.3% 23.2%
Germany 7.3% 9.2%
Netherlands 7.2% 4.6%
Italy 4.1% 2.8%
South Korea 3.9% 0.0%
Switzerland 3.5% 9.6%
Canada 3.4% 0.0%
Belgium 1.8% 1.0%
Regional Allocation
  • Europe – other 75.9%
  • Pacific 12.8%
  • North America 4.0%
  • Emerging Asia 5.5%
  • Developed Middle East 0.9%
  • Emerging Latin America 0.0%

Commentary (As of December 31, 2024)

Highlights

  • International developed equity markets appreciated in local currency terms for December, concluding a calendar year of positive performance.
  • Deficit spending is widespread, with major economies like the US, Brazil, France, and India leading in deficit-to-GDP ratios.
  • We believe non-US markets, trading at historic valuation discounts to the US, offer significant upside potential in 2025, particularly laggards in the industrials, consumer staples, consumer discretionary, and healthcare sectors.

Portfolio Attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the pharmaceuticals & biotechnology, materials, and capital goods industry groups contributed to relative performance. Holdings in the technology hardware & equipment and health care equipment & services industry groups, along with an underweight position in the automobiles & components industry group, offset some of the outperformance compared to the Index. The top contributor to return was multinational luxury conglomerate, Kering SA (France). Other notable contributors included alcoholic beverage distributor, Diageo Plc (United Kingdom), and paints & coatings producer, Akzo Nobel (Netherlands). The largest detractor was electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea). Additional notable detractors included healthcare equipment & services provider, Koninklijke Philips NV (Netherlands), and beverage company, Anheuser-Busch InBev SA/NV (Belgium).

Quarterly Investment Outlook

Deficit spending is widespread, with major economies like the US, Brazil, France, and India leading in deficit-to-GDP ratios. Despite the US having the largest budget deficit in the Organisation for Economic Co-operation and Development (OECD), the dollar appreciated in 2024, while currencies in other fiscally constrained nations weakened. China’s exports remain strong, driven by investments in new business operations abroad in automotive, clean energy, information technology, and mining, though potential tariffs and slower growth in 2025 may pressure its trading partners in Asia and Africa. While the Federal Reserve monitors the possibility of tariff-induced inflation, the European Central Bank and Bank of England are likely to continue cutting interest rates to support their economies.

We believe non-US markets, trading at historic valuation discounts to the US, offer significant upside potential in 2025, particularly laggards in the industrials, consumer staples, consumer discretionary, and healthcare sectors. European stocks could see their valuation discount narrow if there is an end to the Ukraine war, a rebound in corporate investments, and lower energy prices. Enterprise adoption of generative AI should drive IT services demand and accelerate growth in advanced processors and memory. Across sectors and geographies, we continue to identify companies focused on operational restructuring, enhancing efficiency, and driving earnings growth to deliver shareholder value in the year ahead.

The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the portfolio holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. The securities identified and described above do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Past performance does not guarantee future results. For a description of our performance attribution methodology, or to obtain a list showing every holding's contribution to the overall account's performance during the quarter, please contact our product manager, Kevin Moutes, at 310-231-6116 or [email protected].