International Growth Fund - Portfolio Review March 2020 Portfolio Managers - William Blair Funds
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
International Growth Fund
Portfolio Review
March 2020
Simon Fennell, Partner
Kenneth J. McAtamney, Partner
Portfolio Managers
10047315William Blair International Growth Fund Important Disclosures March 2020
Risks:
The views expressed in this report and the information about the holdings are as of the date of this material, unless otherwise
noted, and are subject to change. Information about the Fund’s holdings should not be considered investment advice. There is no
guarantee that the Fund will continue to hold any one particular security or stay invested in any one particular sector. Holdings are
subject to change at any time.
The Fund’s returns will vary, and you could lose money by investing in the Fund. International investing involves special risk
considerations, including currency fluctuations, lower liquidity, economic and political risk. Investing in emerging markets can
increase these risks, including higher volatility and lower liquidity. Investing in smaller and medium capitalization companies
involves special risks, including higher volatility and lower liquidity. Small and mid-cap stocks are also more sensitive to
purchase/sale transactions and changes in the issuer’s financial condition. The Fund invests most of its assets in equity securities of
international growth companies where the primary risk is that the value of the equity securities it holds might decrease in response
to the activities of those companies or market and economic conditions. Diversification does not ensure against loss.
Performance cited represents past performance. Past performance does not guarantee future results and current
performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume
reinvestment of dividends and capital gains. Investment returns and principal will fluctuate with market and economic
conditions and you may have a gain or loss when you sell shares. For the most current month end performance
information, please call 1‐877‐962‐5247, or visit our Web site at www.williamblairfunds.com. Class N shares are available
to the general public without a sales load. Class I and Class R6 shares are available only to investors who meet certain
eligibility requirements.
This content is for informational and educational purposes only and is not intended as investment advice or a recommendation to
buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s
objectives, guidelines and restrictions.
Most recent month-end performance information for the Fund is available by visiting the William Blair Funds Web site at
www.williamblairfunds.com, or by calling the William Blair Funds at 1-800-742-7272.
Please carefully consider the Fund’s investment objectives, risks, charges, and expenses before investing. This and other
information is contained in the Fund’s prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272.
Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.
Copyright © 2020 William Blair & Company, L.L.C. “William Blair” is a registered trademark of William Blair & Company, L.L.C.
Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.
2 10047315William Blair International Growth Fund Summary & Outlook March 2020
Market Review stimulus measures pledged by the government as a way to
offset the effects of COVID-19 in an already slowing economy.
Global equities plunged and volatility spiked in the first The daily new virus cases in China significantly declined
quarter amid heightened anxieties surrounding the rapid towards the end of the quarter and economic activity
spread of the novel coronavirus (COVID-19) and its impact on modestly improved.
the global economy. The MSCI ACWI IMI ended the quarter
down 22.44% in USD terms. The selloff began at the end of From a global sector perspective, energy sharply declined
February and continued through March as the number of daily (MSCI ACWI IMI Energy -45.31%) as the oil price war
new cases continued to surge globally. Governments urged between Russia and Saudi Arabia intensified. The Airlines
individuals to shelter in place and businesses to shut down in industry also plunged -49.59% as mass flight cancellations
the hopes of curtailing the virus, while also promising massive started to mount. Conversely, more stable and defensive
fiscal stimulus. Major central banks announced various forms sectors such as Healthcare (-12.05%) and Consumer Staples
of quantitative easing in an attempt to maintain financial (-14.33%) outperformed on a relative basis.
system stability. The collapse in oil prices further
compounded investor anxieties following Russia’s decision to Performance
walk away from its informal alliance with Saudi Arabia and
other OPEC countries. The WTI oil price plummeted 67%— Outperformance of the International Growth Fund (Class N)
the worst quarter on record. versus the MSCI AC World ex US IMI (net) index was primarily
driven by positive stock selection across most sectors. The
The longest bull market in US history came to an abrupt halt Financials, Communication Services and Consumer
with US equities falling 21.06%, the worst quarterly loss since Discretionary sectors were the most significant contributors
2008. The Federal Reserve issued two emergency rate cuts to relative return. Within Financials, AIA Group and London
and began aggressively purchasing Treasuries as a means to
Stock Exchange (LSE) propelled relative performance. AIA
prevent a liquidity crisis. The government’s fiscal response of
Group, a leading provider of life insurance throughout Asia,
approximately $2 trillion dollars included checks to
supplement individual wages, bailouts for major airlines, and has witnessed a temporary disruption to new business sales
aid for small businesses. due to the COVID-19 pandemic. While the speed of recovery
will depend on the duration and severity of the outbreak and
Emerging markets equities broadly declined (-24.40% as associated containment measures, the value proposition of
measured by the MSCI Emerging Markets IMI) for the quarter protection policies has become stronger as a result of the
amid soured investor sentiment towards riskier assets, virus. The opportunity remains significant with AIA, as it
plunging commodity prices, and a strengthening US dollar. should continue to benefit from the strong structural growth
Latin America suffered the most (-46.30%), driven by trends of rising affluence and low insurance penetration given
weakness in Brazil and Colombia (-50.82% and -49.77% in US its strong brand and distribution. Tencent, within the
dollar terms). In contrast, China’s performance relative to Communication Services sector, also added to returns
global markets was resilient (-10.31%), supported by sizable
3 10047315William Blair International Growth Fund Summary & Outlook March 2020
primarily due to the financial strength of the business and the Positioning
short-term benefits of more people staying indoors due to the
During the period, Information Technology exposure
pandemic. Tencent’s market dominance of the online Chinese
increased as a result of the purchase of Disco and Infineon
ecosystem drives its ability to monetize engagement across its
Technologies, both in the semiconductor industry. A classic
platform, which has resulted in a sustained growth rate of
razor/razor blade model, Disco sells semi equipment used in
greater than 20% despite its large $50B revenue base. New
dicing and polishing of semi wafers, part of the manufacturing
content launches and higher monetization rates should
process to make chips. Along with the equipment, they sell
continue to drive growth over the long-term. We believe it
consumables (blades and chemicals) used in their machines to
can continue to manage ad growth at a relatively high level
do the actual cutting and polishing. We believe the current
while adding relevant ads to users, supporting our investment
stock price is reflecting near-term issues of overall semi
thesis. TAL Education Group, a leading K-12 tutoring services
demand weakness in 2019 and broad stock market weakness
provider in China within the Consumer Discretionary sector,
in Q1 2020, rather than the long term opportunity. Infineon, a
was an additional source of outperformance. TAL Education
semiconductor company based in Germany, is a leader in
helps prepare students in core academic subjects through
structural opportunities in automotive and power markets.
one-on-one tutoring, small classes and online courses to help
This should continue to enable superior growth driven by
them improve their GPA and prepare for important entrance
content gains and supportive regulation. Financials exposure
exams for middle school, high school, and college. With a
declined during the period due to the sales of Toronto
brand known for improving student performance, we believe
Dominion Bank and Macquarie Group. The backdrop for
TAL will continue to be a consolidator in this highly
banks has become more challenging with lower interest rates
fragmented industry. Additionally, the strength of the
and the declining GDP outlook. From a geographic
business model was demonstrated this quarter as it was able
perspective, notable adjustments were increases to Emerging
to shift students from offline to online classes during the viral
Asia offset by decreases to Canada and Latin America.
outbreak in China, further strengthening its competitive
advantage. Market Outlook
Partially offsetting these effects was an underweight to Japan This commentary has been adapted from our April 2 client
and an underweight to the Consumer Staples sector coupled webinar COVID-19 Implications: Navigating the Path Forward.
with negative stock selection. Approximately 2/3 of the
underperformance due to stock selection in Consumer Staples We continue to analyze the global pandemic crisis in multiple
was attributable to not owning Nestle, which outperformed contexts including the nature of the virus and the status of our
due to the defensive nature of the business. Other detractors collective health risk, the societal and economic impact, and in
in the sector were Hindustan Unilever, FeverTree and Bid turn, the effects on markets and our portfolios.
Corp. Stock selection was positive in all other sectors.
As the virus has spread from China to Europe to the US and
over 150 countries, we have experienced market volatility
and a downturn unlike any since the Global Financial Crisis,
4 10047315William Blair International Growth Fund Summary & Outlook March 2020
and by some measures since the 1930s. Governments around Fiscal stimulus measures announced to date have been
the world have begun to wrap their arms around the significant. But the challenges of implementing the stimulus—
magnitude of the contagion and have acted meaningfully to in terms of channeling it to the right individuals and
suppress the infection curve by effectively shutting down businesses in a timely manner—will result in bankruptcies
massive swaths of the global economy. This has coincided and massively higher unemployment, which is already
with unprecedented levels of monetary and fiscal stimulus evident. The speed and vigor of the recovery will largely
measures to ease the effects on displaced workers and the depend on how quickly the newly unemployed can be
impact to businesses. The stimulus response has been reabsorbed into the economy and how quickly businesses can
particularly strong in developed markets, while emerging reopen.
market governments overall may be more limited in their
ability to stimulate. These are key elements to dimensioning the bear, bull and
base case scenarios, and they are incredibly fluid. We are
From an economic impact perspective, we are expecting a beginning to understand the scale of the unemployment
very deep recession to be met with continued strong policy problem, but we do not yet have any clarity on the extent of
responses, supporting a steep sequential recovery later this potential bankruptcies. Beyond unemployment and
year. While the recovery will likely be strong, we acknowledge bankruptcies, we continue to closely track high-frequency
it could take 8 to 10 quarters before growth normalizes to survey indicators—including purchasing managers’ indices
pre-crisis levels. and their subcomponents—to help assess the magnitude of
corporate order book deterioration, supply chain challenges
For China, the full brunt of the economic decline is likely to be and pricing pressures. All of these questions are elucidated on
borne in the first quarter of 2020, while Europe and US a monthly basis through the survey data.
economic activity levels are likely to trough between March
and May. This means that GDP contraction (i.e. economic We have remained steadfastly focused on seeking
recession) is likely to be spread over the first and second opportunities to add to our best ideas in this tumultuous
quarters of 2020. Projections for the drop in second quarter environment, looking beyond transitory virus-related
US GDP vary widely, and include the potential for the largest business effects. In particular, we are interested in quality
sequential decline in the history of recorded data. growth companies that have been out of our reach purely
from a valuation perspective, as well as high-quality cyclicals
The duration and the durability of lockdowns are key to that have witnessed significant declines but have the
gaging the subsequent reopening of the economy, and by wherewithal to navigate the crisis.
extension, the advent of the recovery. Our base case today
assumes that lockdowns remain in place at least through the In order to mitigate risk, we are paying special attention to
end of April. However, if coronavirus testing that is now being two specific concerns. The first are portfolio companies that
rolled out on a massive scale proves to be insufficient such may have previously benefitted from the steady, albeit low
that lockdowns need to be extended, this will delay the growth outlook. These are now more at risk of being exposed
recovery and introduce a more bearish element to it. for being less in control of their own destiny than we
previously thought. The second area, and its related area of
5 10047315William Blair International Growth Fund Summary & Outlook March 2020
research, are the companies in our portfolios with more downward trend in daily new virus cases that has led to a
fragile balance sheets and increased solvency risk resulting gradual reopening of the economy.
from pandemic-related cash flow pressures. We likely have
few of these risks, but in those few instances the outcomes Interestingly, many of the aforementioned structural growth
could be severe. themes are flourishing in China as the government prioritizes
investment in higher value added, technology-enabled areas.
It has been encouraging for us to see the market differentiate Our research process continues to uncover attractive Chinese
those companies that are tied to more structurally advantaged companies that not only have attractive growth rates, but high
themes amid the downturn. Technology-enabled growth areas quality attributes in terms of financial performance and
like distributed computing, 5G telecom, ecommerce, online innovation, which we think are underappreciated by many
education and telemedicine have outperformed more investors.
traditional, “old economy” industries, regardless of valuation
differentials favoring the latter. Our conviction in portfolio More broadly across Asia, we are attracted to the relative
companies tied to these growth areas is actually increasing in stability of markets like South Korea and Taiwan, where new
this environment, as their competitive positions are likely to virus cases have already peaked and economies are more
strengthen amid the downturn. resilient, supported by relatively strong fiscal positions, stable
currencies and prominent technology sectors that have
At the same time, we are being diligent in reassessing become increasingly integral to global supply chains.
cyclically-oriented companies within our quality growth
universe that have been heavily penalized in recent weeks. In recent weeks we have been diligent in speaking with as
These include automotive and travel-related companies, and many portfolio companies as we can: in March alone we had
select financials where share prices may be discounting overly over 125 corporate touchpoints. We wish we were getting
bearish revenue and profit scenarios. more reassurances on demand and client activity from
management teams, but we recognize that their visibility
From a geographic perspective, we came into 2020 expecting remains extremely limited given uncertainties surrounding
that improving relative growth rates of non-US economies the pandemic.
would help non-US developed and emerging markets equities
begin to narrow the performance gap versus the US. The What we are learning from them, however, is their
pandemic-induced recession has abruptly altered this outlook, preparedness and their ability to navigate through the crisis
with the US economy, bolstered by its technology sector in terms of protecting client relationships, effective resource
leadership, now likely better positioned to endure the management, and execution around their strategy. As in all
significant near-term growth headwinds. crises, the best will not only survive, but will actually emerge
stronger, with improved competitive positioning and more
Looking beyond the US, China’s performance has been enduring growth prospects. This is where we are continuing
impressively resilient. This has been supported initially by to focus.
sizable government stimulus measures to offset the
detrimental effects of the virus, and more recently by the
6 10047315William Blair International Growth Fund Summary & Outlook March 2020
Over the last several weeks we have received many inquiries frameworks to help us collectively assess the impact of the
about the state of our firm, our investment team, and our virus on the economy as well as industry and company
investment process. I must say that I’ve been inspired, but not growth rates. This exercise is not just a triage for the current
surprised, by the energy and the commitment of our crisis, but an opportunity for deeper, reflective work on its
investment professionals and all team members in this very longer-term growth implications. This has provided cohesion
challenging time. and consistency to our process.
The collaborative, engaged nature of our investment process It’s actually been very rich and rewarding work in these trying
has prepared us remarkably well for this more decentralized, times. In fact, I would describe our work culture as not one of
virtual form of work and connectedness. The content of our panic, but one of tremendous productivity.
research has never been richer. And the engagement and the
commitment of the team have never been stronger. We are Ken McAtamney, Partner
collaborating on the development of new tools and Head of Global Equity Team
7 10047315Market Performance March 2020
QTD 2019 2018 2017
AC World (DM+EM) -22.4 26.4 -10.1 23.9
Developed Markets (DM) -22.2 27.5 -9.4 22.4
Pacific ex JP -28.4 18.3 -11.2 25.9
Japan -17.4 19.6 -13.5 25.3
Europe ex UK -23.3 25.0 -15.7 28.0
Regions
UK -30.0 23.2 -15.0 23.7
Canada -28.9 27.9 -17.6 15.6
USA -21.1 30.4 -5.7 20.6
Emerging Markets (EM) -24.4 17.6 -15.0 36.8
Asia -18.9 17.8 -15.9 41.8
EMEA -34.1 15.8 -16.8 24.1
Latin America -46.3 19.4 -7.2 24.8
Frontier Markets (FM) -26.1 13.8 -16.6 29.9
Large Cap -20.3 26.7 -8.6 23.9
Size
Small Cap -30.2 24.7 -14.4 23.8
Communication Svcs -16.9 24.2 -10.9 8.2
Discretionary -23.7 26.8 -9.8 25.0
Staples -14.3 20.8 -10.5 18.0
Energy -45.3 11.6 -14.9 5.2
Financials -32.1 22.9 -15.7 23.1
Sectors
Healthcare -12.0 23.2 1.2 22.0
Industrials -27.3 26.7 -15.5 26.1
IT -14.6 46.5 -6.2 41.0
Materials -28.0 20.0 -17.3 29.3
Real Estate -26.0 24.6 -7.8 16.2
Utilities -15.4 21.3 0.9 15.2
Quality 7.1 5.6 13.9 4.3
Valuation -11.6 -0.1 2.4 5.2
Etrend 6.7 5.2 5.4 7.8
Style
Momentum 11.1 4.9 3.4 13.2
Growth 8.1 4.1 -3.0 6.7
Composite 1.8 4.3 11.9 9.6
Past performance is not a reliable indicator of future results Regional performance is based on IMI region/country indexes. Sector and style values are based on the MSCI
ACWI IMI Index. Size values are based on the MSCI ACWI Index. Style values reflect the Quintile 1 minus Quintile 5 spread of William Blair’s proprietary quantitative models.
Sectors are based on Global Industry Classification (GICS) sectors. Large Cap and Small Cap based on MSCI Global Investable Market Index Methodology. Data in blue reflects
the top 20% (highest) values by region, country, sector, and style. Data in red reflects the bottom 20% (lowest) values by region, country, sector, and style. A direct investment
in an unmanaged index is not possible. Name change from Telecommunication Services to Communication Services effective after close of business on 9/28/18; industry and
subindustry reclassifications effective 10/1/18.
8 10047315William Blair International Growth Fund Performance March 2020
Since
Periods ended 3/31/2020 March Quarter 1 Year 3 Year 5 Year 10 Year Inception*
International Growth Fund (WBIGX) – Class N -14.03% -19.91% -8.17% 1.06% 0.26% 4.19% --
International Growth Fund (BIGIX) – Class I -13.99% -19.85% -7.84% 1.39% 0.57% 4.50% --
International Growth Fund (WBIRX) – Class R6 -13.99% -19.82% -- -- -- -- -10.43%
MSCI AC World ex US IMI (net) -15.11% -24.11% -16.32% -2.34% -0.66% 2.14% -18.56%
Class N inception: 10/1/1992
Class I inception: 10/1/1999
*Class R6 inception: 5/2/2019
Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or
higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment
returns and principal will fluctuate with market and economic conditions and you may have a gain or loss when you sell shares. For the most
current month end performance information, please call 1‐877‐962‐5247, or visit our Web site at www.williamblairfunds.com. Class N shares
are available to the general public without a sales load. Class I and Class R6 shares are available only to investors who meet certain eligibility
requirements.
International Growth Fund Expense Ratios:
Gross Net
Class N Shares 1.46% 1.45%
Class I Shares 1.13% 1.13%
Class R6 Shares 1.05% 1.05%
Expenses shown are as of the most recent prospectus.
The Fund’s Adviser has contractually agreed to waive fees and/or reimburse expenses to limit fund operating expenses until 4/30/20.
A direct investment in an index is not possible. The MSCI All Country World ex-US IMI Index 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 US.
9 10047315William Blair International Growth Fund Performance Analysis (by sector) March 2020
The table below shows the calculated sector attribution of the International Growth Fund vs. its benchmark.
International Growth Fund vs. MSCI AC World ex US IMI (net)
01/01/2020 to 03/31/2020
International Growth Fund MSCI AC World ex US IMI (net) Attribution Analysis
Issue
Average Total Contrib to Average Total Contrib to Allocation Selection Total
GICS Sector Weight Return Return Weight Return Return Effect Effect Effect
Communication Services 4.0% -1.7% -0.1% 6.6% -15.4% -1.0% -0.2% 0.5% 0.2%
Consumer Discretionary 13.4% -22.7% -3.1% 11.8% -25.8% -3.1% 0.0% 0.4% 0.4%
Consumer Staples 6.0% -19.2% -1.1% 9.3% -14.9% -1.3% -0.3% -0.3% -0.6%
Energy 1.8% -20.9% -0.3% 5.5% -39.6% -2.4% 0.7% 0.4% 1.0%
Financials 14.3% -26.5% -3.7% 19.4% -31.1% -6.2% 0.4% 0.7% 1.2%
Health Care 11.5% -7.4% -0.8% 9.1% -9.8% -0.9% 0.3% 0.2% 0.6%
Industrials 21.2% -25.9% -5.6% 12.7% -27.4% -3.5% -0.3% 0.4% 0.1%
Information Technology 19.9% -17.1% -3.4% 10.0% -18.5% -1.8% 0.6% 0.3% 0.8%
Materials 2.6% -14.9% -0.4% 7.5% -27.9% -2.2% 0.2% 0.3% 0.5%
Real Estate 2.7% -15.7% -0.4% 4.4% -27.8% -1.2% 0.1% 0.3% 0.4%
Utilities 1.6% -9.8% -0.2% 3.6% -16.6% -0.6% -0.1% 0.1% 0.0%
Cash 1.1% - 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.3%
Total 100.0% -19.2% -19.2% 100.0% -24.1% -24.1% 1.6% 3.3% 4.9%
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period,
including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent
simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary
attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. Sectors are
based on Global Industry Classification (GICS) Sectors. International investing involves special risk considerations, including currency fluctuations, lower liquidity,
economic and political risk.
10 10047315William Blair International Growth Fund Performance Analysis (by region) March 2020
The table below shows the calculated regional attribution of the International Growth Fund vs. its benchmark.
International Growth Fund vs. MSCI AC World ex US IMI (net)
01/01/2020 to 03/31/2020
International Growth Fund MSCI AC World ex US IMI (net) Attribution Analysis
Issue
Average Total Contrib to Average Total Contrib to Allocation Selection Total
Region Weight Return Return Weight Return Return Effect Effect Effect
Pacific Ex Japan 5.1% -22.2% -1.1% 7.8% -28.4% -2.2% 0.1% 0.3% 0.4%
Japan 12.5% -14.6% -1.9% 17.0% -17.4% -2.9% -0.4% 0.3% 0.0%
Europe+ME Ex U.K. 40.1% -18.5% -7.3% 31.4% -24.0% -7.5% 0.0% 2.2% 2.2%
U.K. 13.2% -26.9% -3.7% 10.1% -28.3% -2.9% -0.2% 0.2% 0.1%
W Hemisphere 5.8% -21.5% -1.2% 6.7% -28.9% -1.9% 0.1% 0.4% 0.5%
EM Asia 18.8% -13.8% -2.5% 20.3% -19.0% -3.7% -0.1% 0.9% 0.8%
EMEA 0.9% -34.1% -0.3% 3.8% -34.3% -1.4% 0.3% 0.0% 0.3%
Latin America 2.5% -46.1% -1.1% 2.9% -46.2% -1.5% 0.2% 0.0% 0.2%
Cash 1.1% - 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.3%
Total 100.0% -19.2% -19.2% 100.0% -24.1% -24.1% 0.5% 4.4% 4.9%
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period,
including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent
simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary
attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. International
investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk
11 10047315William Blair International Growth Fund Top Contributors/Detractors March 2020
The tables below show the top contributors and detractors for the International Growth Fund vs. its benchmark.
Top Five Contributors (%) for the Period: 01/01/2020 to 03/31/2020
Issuer Sector Country Contribution To
Relative Return
Lonza Group AG Health Care Switzerland 0.53
Coloplast A/S Health Care Denmark 0.24
Tencent Holdings Ltd Communication Services China 0.23
Keyence Corp Information Technology Japan 0.21
Novo Nordisk A/S Health Care Denmark 0.20
Top Five Detractors (%) for the Period: 01/01/2020 to 03/31/2020
Issuer Sector Country Contribution To
Relative Return
Airbus SE Industrials France -0.44
MTU Aero Engines AG Industrials Germany -0.27
Safran SA Industrials France -0.19
Amadeus IT Group SA Information Technology Spain -0.19
Melrose Industries PLC Industrials United Kingdom -0.16
Index: MSCI AC World ex US IMI (net)
Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher
than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of
transaction costs. Performance results will be reduced by the fees incurred. Attribution by is based on estimated returns of all equities held during a measurement
period, including purchases and sales. We calculate attribution using our proprietary attribution system. Our proprietary attribution system runs transactions-
based attribution, taking into account all trading activity. Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report
are for informational purposes only. Holdings are subject to change at any time. This information does not constitute, and should not be construed as, investment advice or
recommendations with respect to the securities listed. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended and
you should not assume that investments in the securities identified were or will be profitable
12 10047315William Blair International Growth Fund Positioning March 2020
Regional Exposure Sectoral Exposure
4.1 4.8
Communication Services 1.3
Asia Ex-Japan -0.9 7.1
7.3
12.9
Consumer Discretionary -0.3
13.2 11.7
Japan 0.6
18.3 6.7
Consumer Staples 0.6
10.1
40.4 1.6
Europe+ME Ex U.K. 0.3 Energy 0.0
31.5 4.8
10.9
Financials -4.0
12.5 18.1
United Kingdom -1.0
9.8 14.1
Health Care 3.1
10.3
4.7 20.1
Western Hemisphere -1.1 Industrials -2.0
6.3 12.3
21.7
22.7 Information Technology 2.7
EM Asia 10.4
5.5
21.1 2.5
Materials -0.2
7.3
0.7
EMEA -0.4 2.7
3.5 Real Estate 0.1
4.2
1.7
1.3 Utilities 0.2
Latin America -1.5 3.7
2.3
--
Other 0.0
0.0
0.3
Cash & Equivalents -1.5 0.3
-- Cash & Equivalents -1.5
--
International Growth Fund MSCI AC World ex US IMI (net) Portfolio Diff Prev QTR
International Growth Fund MSCI AC World ex US IMI (net) Portfolio Diff Prev QTR
Source: William Blair.
Cash & Equivalents includes: cash and dividend accruals.
13 10047315William Blair International Growth Fund Top Holdings by Market Cap March 2020
The table below shows the International Growth Fund’s largest holdings as of 3/31/2020 by market cap as well as the sub-totals by
market cap for the portfolio and index. The stocks are listed by country and by the sector that defines each one’s role in the portfolio.
% of Total % of Total
Net Assets in Net Assets in
Country Sector Portfolio Index*
Large Cap(>$15b) 60.7% 53.3%
Alibaba Group Holding Ltd China Consumer Discretionary 2.7% 1.7%
Tencent Holdings Ltd China Communication Services 2.6% 1.4%
Lonza Group AG Switzerland Health Care 2.1% 0.2%
Taiwan Semiconductor Taiwan Information Technology 2.1% 1.1%
Manufactu
ASML Holding NV Netherlands Information Technology 2.1% 0.6%
Mid Cap($4-15b) 25.1% 23.9%
Hexagon AB Sweden Information Technology 0.9% 0.1%
MediaTek Inc Taiwan Information Technology 0.9% 0.1%
Halma PLC United Kingdom Information Technology 0.8% 0.0%
Partners Group Holding AG Switzerland Financials 0.8% 0.1%
Capgemini SE France Information Technology 0.8% 0.1%
Small Cap(William Blair International Growth Fund Top Portfolio Changes March 2020
Top Portfolio Changes During the Period: 01/01/2020 to 03/31/2020
Security Name Country Sector
Straumann Holding Ag-Reg Switzerland Health Care
Purchases
Disco Corp Japan Information Technology
New
Infineon Technologies Ag Germany Information Technology
Sea Ltd-Adr Thailand Communication Services
Foshan Haitian Flavouring -A China Consumer Staples
Wolters Kluwer Netherlands Industrials
Liquidations
Toronto-Dominion Bank Canada Financials
Koninklijke Philips Nv Netherlands Health Care
Check Point Software Tech Israel Information Technology
Credicorp Ltd Peru Financials
Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report are for informational purposes only. Holdings are subject
to change at any time. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities
listed. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended and you should not assume that investments
in the securities identified were or will be profitable.
15 10047315William Blair International Growth Fund Characteristics March 2020
International Growth Fund MSCI AC World ex US IMI (net) Difference
Quality
Return on Equity (%) 20.2 14.1 43%
Cash Flow ROIC (%) 18.8 14.5 30%
Debt/Equity (%) 62.8 88.7 -29%
Growth
Long-Term Growth (%) 12.6 9.7 30%
5-Year Historic EPS Growth (%) 16.8 11.4 47%
Reinvestment Rate (%) 13.8 8.7 59%
Earnings Trend
EPS Revision Breadth (%) -30.1 -25.9 -4.2
Valuation
P/E (next 12 months) 21.3 12.0 77%
Other
Float Adjusted Weighted Average Market Cap ($m) 45,369 45,310 0%
Number of Holdings 193 6,593
Active Share (%) 83 --
The index is comparable to the strategy in terms of investment approach but contains significantly more securities. Calculated in FactSet, with the exception of market cap
and active share, which are calculated in Eagle.
From a portfolio perspective, the portfolio P/E ratio and EPS Growth Rate are weighted averages of the individual holdings’ P/E ratios and EPS Growth Rates.
16 10047315William Blair International Growth Fund Holdings March 2020
Portfolio Portfolio Portfolio
Weight Weight Weight
Pacific Ex Japan 4.13 Japan (continued) Europe+ME Ex UK (continued)
Australia 2.00 Japan (continued) France 9.81
Csl Ltd 1.31 Technopro Holdings Inc 0.23 Lvmh Moet Hennessy Louis Vui 1.42
Goodman Group 0.33 Benefit One Inc 0.17 L'Oreal 1.41
Aristocrat Leisure Ltd 0.29 Zenkoku Hosho Co Ltd 0.16 Kering 0.97
Macquarie Group Ltd 0.06 Sushiro Global Holdings Ltd 0.15 Airbus Se 0.96
Hong Kong 2.06 Ns Solutions Corp 0.13 Dassault Systemes SA 0.88
Aia Group Ltd 1.87 Persol Holdings Co Ltd 0.12 Safran SA 0.87
Galaxy Entertainment Group L 0.19 Meitec Corp 0.12 Capgemini Se 0.81
New Zealand 0.08 En-Japan Inc 0.06 Teleperformance 0.76
Auckland Intl Airport Ltd 0.08 Ut Group Co Ltd 0.05 Worldline SA 0.62
Japan 13.24 Europe+ME Ex UK 40.42 Hermes International 0.43
Japan 13.24 Belgium 0.37 Orpea 0.28
Keyence Corp 1.85 Warehouses De Pauw Sca 0.26 Sartorius Stedim Biotech 0.25
Smc Corp 1.48 Melexis NV 0.11 Rubis 0.15
Hoya Corp 1.34 Denmark 6.15 Alten SA 0.01
Daikin Industries Ltd 1.03 Novo Nordisk A/S-B 1.81 Germany 4.33
Terumo Corp 0.94 Orsted A/S 1.01 Sap Se 1.05
Shiseido Co Ltd 0.91 Dsv Panalpina A/S 0.97 Vonovia Se 0.91
Omron Corp 0.67 Coloplast-B 0.94 Mtu Aero Engines AG 0.72
Disco Corp 0.60 Genmab A/S 0.65 Infineon Technologies AG 0.45
Nomura Research Institute Lt 0.54 Chr Hansen Holding A/S 0.39 Teamviewer AG 0.40
Asahi Intecc Co Ltd 0.48 Royal Unibrew 0.22 Puma Se 0.39
Nihon M&A Center Inc 0.40 Tryg A/S 0.14 Carl Zeiss Meditec Ag - Br 0.28
Tis Inc 0.39 Netcompany Group As 0.03 Kion Group AG 0.13
Shimadzu Corp 0.37 Faroe Islands 0.13 Ireland 1.86
Misumi Group Inc 0.31 Bakkafrost P/F 0.13 Kerry Group Plc-A 0.66
Harmonic Drive Systems Inc 0.25 Finland 0.92 Kingspan Group PLC 0.62
Monotaro Co Ltd 0.24 Neste Oyj 0.92 Icon PLC 0.58
Gmo Payment Gateway Inc 0.24
As of 3/31/2020. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one
particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.
17 10047315William Blair International Growth Fund Holdings March 2020
Portfolio Portfolio Portfolio
Weight Weight Weight
Europe+ME Ex UK (continued) Europe+ME Ex UK (continued) UK (continued)
Israel 0.47 Switzerland 6.68 United Kingdom (continued)
Wix.Com Ltd 0.25 Lonza Group Ag-Reg 2.13 Intermediate Capital Group 0.23
Cyberark Software Ltd/Israel 0.23 Sika Ag-Reg 1.29 Big Yellow Group PLC 0.22
Italy 1.20 Partners Group Holding AG 0.83 St James's Place PLC 0.21
Enel Spa 0.56 Straumann Holding Ag-Reg 0.73 Softcat PLC 0.18
Amplifon Spa 0.20 Temenos Ag - Reg 0.61 Beazley PLC 0.18
Moncler Spa 0.19 Logitech International-Reg 0.39 Rotork PLC 0.18
Banca Generali Spa 0.18 Tecan Group Ag-Reg 0.29 Renishaw PLC 0.16
Technogym Spa 0.07 Vat Group AG 0.25 Wh Smith PLC 0.14
Netherlands 3.23 Belimo Holding Ag-Reg 0.16 Abcam PLC 0.13
Asml Holding NV 2.06 UK 12.51 Ssp Group PLC 0.10
Adyen NV 0.88 United Kingdom 12.51 Unite Group Plc/The 0.09
Euronext NV 0.22 Experian PLC 1.20 Fevertree Drinks PLC 0.09
Basic-Fit NV 0.07 London Stock Exchange Group 1.10 W Hemisphere 4.66
Norway 0.23 Diageo PLC 1.08 Canada 4.66
Tomra Systems Asa 0.23 Compass Group PLC 0.95 Canadian Natl Railway Co 1.11
Spain 0.88 Halma PLC 0.85 Canadian Pacific Railway Ltd 0.88
Amadeus It Group SA 0.88 Relx PLC 0.82 Brookfield Asset Manage-Cl A 0.79
Sweden 4.17 Segro PLC 0.68 Lululemon Athletica Inc 0.72
Atlas Copco Ab-A Shs 1.69 Spirax-Sarco Engineering PLC 0.65 Alimentation Couche-Tard -B 0.65
Hexagon Ab-B Shs 0.91 Rentokil Initial PLC 0.57 Kinaxis Inc 0.18
Evolution Gaming Group 0.41 Intertek Group PLC 0.50 Toromont Industries Ltd 0.15
Fabege AB 0.20 Croda International PLC 0.39 Enghouse Systems Ltd 0.14
Indutrade AB 0.20 3i Group PLC 0.36 Parkland Fuel Corp 0.04
Nibe Industrier Ab-B Shs 0.19 Greggs PLC 0.33 EM Asia 22.74
Nolato Ab-B Shs 0.17 Aveva Group PLC 0.31 China 15.64
Lifco Ab-B Shs 0.16 Avast PLC 0.31 Alibaba Group Holding-Sp Adr 2.65
Aak AB 0.14 Hiscox Ltd 0.26 Tencent Holdings Ltd 2.61
Vitrolife AB 0.10 Victrex PLC 0.24 Tal Education Group- Adr 1.38
As of 3/31/2020. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one
particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.
18 10047315William Blair International Growth Fund Holdings March 2020
Portfolio Portfolio Portfolio
Weight Weight Weight
EM Asia (continued) EM Asia (continued) Latin America (continued)
China (continued) India (continued) Brazil (continued)
Ping An Insurance Group Co-H 1.36 Hexaware Technologies Ltd 0.09 Notre Dame Intermed Par SA 0.21
China Merchants Bank-H 1.14 Indonesia 1.01 Lojas Renner S.A. 0.12
Netease Inc-Adr 0.98 Bank Central Asia Tbk Pt 1.01 Localiza Rent A Car 0.12
Li Ning Co Ltd 0.59 South Korea 0.66 Mexico 0.12
Kweichow Moutai Co Ltd-A 0.57 Samsung Sdi Co Ltd 0.41 Grupo Aeroportuario Sur-Adr 0.12
Country Garden Services Hold 0.36 Kakao Corp 0.26 Cash 0.30
China Mengniu Dairy Co 0.34 Taiwan 3.25 Total 100.00
Centre Testing Intl Group-A 0.33 Taiwan Semiconductor-Sp Adr 2.10
Shenzhou International Group 0.33 Mediatek Inc 0.86
Foshan Haitian Flavouring -A 0.33 Globalwafers Co Ltd 0.20
Hangzhou Tigermed Consulti-A 0.30 Eclat Textile Company Ltd 0.09
Aier Eye Hospital Group Co-A 0.29 Thailand 0.68
Shenzhen Mindray Bio-Medic-A 0.25 Sea Ltd-Adr 0.37
A-Living Services Co Ltd-H 0.24 Tisco Financial-Foreign 0.16
Topchoice Medical Corporat-A 0.21 Airports Of Thailand Pcl-For 0.15
Offcn Education Technology-A 0.21 EMEA 0.66
Shenzhen Goodix Technology-A 0.20 Russia 0.42
Wuxi Biologics Cayman Inc 0.20 Yandex Nv-A 0.42
Naura Technology Group Co-A 0.20 South Africa 0.24
Huazhu Group Ltd-Adr 0.19 Bid Corp Ltd 0.10
Wuxi Apptec Co Ltd-A 0.18 Mr Price Group Ltd 0.07
Tencent Music Entertainm-Adr 0.11 Bidvest Group Ltd 0.07
Vitasoy Intl Holdings Ltd 0.10 Latin America 1.34
India 1.49 Argentina 0.19
Reliance Industries Ltd 0.65 Globant SA 0.19
Hdfc Bank Limited 0.37 Brazil 1.03
Pidilite Industries Ltd 0.19 B3 Sa-Brasil Bolsa Balcao 0.32
Titan Co Ltd 0.19 Magazine Luiza SA 0.25
As of 3/31/2020. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one
particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.
19 10047315Glossary - Terms
1 Month EPS Revision Breadth: 1-month factor representing the trend in the direction of estimate changes. Range from -100% to +100%, it is calculated
as the number of positive revisions minus the number of negative revisions divided by the total number of estimates.
Active Share: A measure of the percentage of equity holdings in a portfolio that differ from the benchmark index. It is calculated by taking the sum of the
absolute value of the differences of the weight of each holding in a portfolio versus the weight of each holding in the index and dividing by two.
Alpha: A measure of a portfolio’s return in excess of the market return, after both have been adjusted for risk. It is a mathematical estimate of the amount
of return expected from a portfolio above and beyond the market return at any point in time. For example, an alpha of 1.25 indicates that a stock is
projected to rise 1.25% in price in a year over the return of the market, or the return when the market return is zero. When an investment price is low
relative to its alpha, it is undervalued, and considered a good selection.
Beta: A quantitative measure of the volatility of the portfolio relative to the overall market, represented by a comparable benchmark. A beta above 1 is
more volatile than the overall market, while a beta below 1 is less volatile, and could be expected to rise and fall more slowly than the market.
Cash Flow Return on Invested Capital (ROIC): A measure of how effectively a company generates cash flow based on legacy capital investment.
Developed Markets: Using the Morgan Stanley Capital International (MSCI) geographic definition, this region includes: United Kingdom, Europe (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Spain, Sweden and Switzerland), Japan, Pacific Asia (Australia,
Hong Kong, New Zealand, and Singapore) and the Western Hemisphere (Canada and other Americas).
Debt to Total Capital Ratio: This figure is the percentage of each company’s invested capital that consists of debt. Companies with a high Debt to Total
Capital level may be considered more risky. From a portfolio perspective, the portfolio Debt to Total Capital Ratio is a weighted average of the individual
holdings' Debt to Total Capital Ratio.
Emerging Markets: Using MSCI’s geographic definition, this region includes: Emerging Markets Asia (China, India, Indonesia, Malaysia, S Korea, Taiwan,
and Thailand), Emerging Markets Europe, Mid-East and Africa (Czech Republic, Hungary, Poland, Russia, Turkey, Egypt, Morocco, and S Africa), and Latin
America (Argentina, Brazil, Chile, Columbia, Mexico, Peru and Venezuela).
EPS (Earnings Per Share) Growth Rate (Projected): This measure represents the weighted average of forecasted growth in earnings expected to be
experienced by the stocks within the portfolio over the next 3-5 years. From a portfolio perspective, the portfolio P/E ratio and EPS Growth Rate are
weighted averages of the individual holdings’ P/E ratios and EPS Growth Rates. Data calculated in FactSet.
EPS Growth Rate - 5-Year Historic: The weighted average earnings per share growth for stock within the portfolio over the past 5 years.
EV/EBITDA: (Enterprise Value / Earnings Before Interest, Taxes and Depreciation-Amortization): The EV/EBITDA ratio is useful for global
comparisons because it ignores the distorting effects of individual countries' taxation policies. It's used to find attractive takeover candidates. Enterprise
value is a better measure than market cap for takeovers because it takes into account the debt which the acquirer will have to assume. Therefore, a
company with a low EV/EBITDA ratio can be viewed as a good takeover candidate.
EV/IC: (Enterprise Value / Invested Capital) Ratio: Enterprise Value (EV), which is market capitalization minus cash plus debt divided by Invested
Capital (IC), which is the sum of common stock, preferred stock and long-term debt. This number will get you a simple multiple. If it is below 1.0, then it
means that the company is selling below book value and theoretically below its liquidation value.
20 10047315Glossary - Terms
Information Coefficient: A measure of the correlation between expected and actual returns.
Information Ratio: A measure of risk-adjusted return. The annualized excess return of the portfolio relative to a respective benchmark, divided by the
annualized tracking error relative to that same benchmark. The higher the measure, the higher the risk-adjusted return.
PBV: (Price/Book Value) Ratio: The PBV Ratio measures the value of a company's common stock relative to its shareholder's equity. A price-to-book
multiple above one means that the price of the company's common stock is higher than its common shareholder's equity. A price-to-book multiple below
one means that the price of the company's common stock are less than its break-up value, and the shares may be undervalued.
PCF: (Price/CashFlow): Some analysts favor the price/cash flow over the price-earnings (PE) ratio as a measure of a company’s value. Cash flow is a
measure of a company's financial health. It equals cash receipts minus cash payments over a given period of time.
P/E: (Price/Earnings) Ratio: This is the most common measure of how expensive a stock is. Simply, it is the cost an investor in a given stock must pay
per dollar of current annual earnings. A high P/E generally indicates that the market is paying more to obtain the stock because it has confidence in the
company’s ability to increase its earnings. Conversely, a low P/E often indicates that the market has less confidence that the company’s earnings will
increase rapidly or steadily, and therefore will not pay as much for its stock.
R-squared: A measurement of how closely the portfolio’s performance correlates with the performance of its benchmark, such as the MSC AC World Free
ex US Index. In other words, it is a measurement of what portion of a portfolio’s performance can be explained by the performance of the overall market or
index. Ranges from 0 to 1, where 0 indicates no correlation and 1 indicates perfect correlation.
Risk (Standard Deviation): A measure of the portfolio’s risk. A higher standard deviation represents a greater dispersion of returns, and thus a greater
amount of risk. The annualized standard deviation is calculated using monthly returns.
Sharpe-Ratio: A risk-adjusted measure calculated using standard deviation and excess return (Portfolio return – Risk Free Rate) to determine reward per
unit of risk. The higher the Sharpe ratio, the better the portfolio’s historic risk-adjusted performance.
Tracking Error: Tracking Error measures the extent to which a portfolio tracks its benchmark. The tracking error of an index portfolio should be lower
than that of an active portfolio. The tracking error will always be greater than zero if the portfolio is anything other than a replication of the benchmark.
Trailing 1-Year Turnover: This figure reflects the portfolio’s trading activity by calculating the amount of the portfolio’s holdings bought or sold over the
prior year, expressed as a percentage of the portfolio’s average market value. Turnover figures may be related to the amount of trading costs experienced
by the portfolio.
Weighted Average Market Capitalization: Market capitalization refers to the total market value of each company's outstanding shares. The Weighted
Average Market Capitalization for a portfolio is calculated as the average market capitalization of the stocks within the portfolio, weighted by the amount of
each stock owned.
Weighted Median Market Capitalization: This calculation represents the median market capitalization of the stocks in the portfolio, weighted by the
amount of each stock owned.
21 10047315You can also read
