SGA International Growth Equity - Q2 2021 Portfolio Review | July 2021 - Virtus Investment Partners
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SGA International Growth Equity Q2 2021 Portfolio Review | July 2021
Firm Profile
Founded July, 2003
Primary Portfolios Customized Portfolios
• U.S. Large Cap Growth • U.S. Focused Growth
• Global Growth • Global Focused Growth
Portfolios Managed
• International Growth
• Emerging Markets Growth
• Global Mid Cap Growth
$24.6 Billion Firm-Wide*
• $14.1 Billion U.S. Growth
Assets Under Care
• $10.0 Billion Global Growth
• $0.5 Billion International & EM Growth
Ownership 69% majority-owned by Virtus Investment Partners, 31% employee-owned^
Location Stamford, CT
* As of 6/30/2021, $24.6 billion in assets includes $21.0 billion from discretionary accounts and $3.6 billion from emulated (Model) accounts.
^ 17 employee partners as of 6/30/2021
2
Sustainable Growth Advisers
Distinguishing Characteristics
Established Time-Tested Alignment to Stability &
Performance Process Clients Continuity
Pattern
Outperformed in Team-based Broad equity Multi-generational
volatile markets to approach and time- participation, co- team with very low
provide for long- tested philosophy investment and turnover
term compounding enhances process compensation linked
of wealth repeatability to client
performance
SGA International Growth WRAP composite inception is 3/1/2015. The primary benchmark for the SGA International Growth WRAP composite is the MSCI ACWI ex-USA. MSCI ACWI ex-USA
is Net Total Return (MSCI Net Total Return indexes reinvest dividends after the deduction of withholding taxes). Past performance does not guarantee future results.
3Philosophy
Identify those few Perform deep Wield valuation as Focus on a Invest with
differentiated company an essential longer-term time conviction based
global businesses research with element of horizon to take solely on
that offer coverage by growth stock advantage of opportunity and
predictable, multiple analysts selection; cash short-term not benchmark
sustainable to enhance flow metrics best inefficiencies and active weights
growth over the objectivity reflect reality volatility
long term
4SGA International Growth Portfolio
SGA vs ACWI ex-USA SGA vs ACWI ex-USA
Gross Margin 49% 38% EPS Growth 8.3% -5.4%
Cash Flow/Earnings 92% 66% Revenue Growth 11.1% -2.5%
Debt/EBITDA 2.4x 4.3x
Net Debt/Mkt. Cap 6% 36% Quality
Earnings Variability 7.5% 26.3% Pricing Power
Recurring Revenues
Growth
Global Opportunity Over 2x Earnings and
Financial Strength Revenue Growth vs. ACWI
Management Strength ex-USA
SGA
International
Growth
Valuation
Cash Flow Based
SGA vs ACWI ex-USA
Enterprise Yield 2.5% 2.9%
Cash Earnings Ratio is a measure of proportion of earnings that is converted into cash (CFATS / Earnings). Cash Flow Available To Shareholders (CFATS) = Op Cash Flow – Cap X –
Sustaining Acquisitions – Unfunded Obligations (pensions, legal). Enterprise yield (EY) is a proprietary measure of the free cash flow truly available to investors as a percentage of market
value (CFATS / Market Capitalization). Source: Bloomberg, FactSet, and SGA estimates and adjustments. Data as of 6/30/2021. C/E Ratio, EY exclude financials. SGA C/E ratio and
Enterprise Yield projected. EPS and Revenue Growth are historical values since inception of the SGA International Growth composite. SGA International Growth composite inception is
3/1/2015. Earnings Growth data is through 12/31/2020 (last full calendar year of reported EPS data) for SGA’s longest tenured account. SGA EPS Growth data is based upon portfolio
companies non-GAAP operating earnings. EPS calculations exclude companies with earnings going from (i) positive to negative or (ii) negative to positive, year to year. Past performance
5
does not guarantee future results.Higher Growth with Lower Variability
SGA Portfolio Companies have historically grown their earnings at 2-3x the rate of the
index with almost 70% less variability
Annual Earnings Growth 41% 43%
SGA International vs. MSCI ACWI ex-USA
27%
20%
13%
8% 8%
5% 4% 6%
-2%
-12%
-16%
-37%
2015 2016 2017 2018 2019 2020 2021E
Earnings Growth Earnings Variability
SGA International 8.3% 7.5%
MSCI ACWI ex-USA -5.4% 26.3%
Source: Bloomberg, FactSet, SGA Estimates and Adjustments. Data as of 6/30/2021. Historical growth rates for MSCI ACWI ex-USA is sourced from MSCI and Bloomberg. MSCI ACWI ex-
USA estimates and characteristics sourced from Bloomberg and FactSet using MSCI data. C/E Ratio, EY exclude financials. SGA C/E ratio and Enterprise Yield projected. SGA EPS Growth
data is based upon portfolio companies non-GAAP operating earnings. EPS calculations exclude companies with earnings going from (i) positive to negative or (ii) negative to positive, year
6
to year. Growth Variability is calculated using standard deviation of annual EPS growth, since inception 3/1/15. All accounts are modeled in line with SGA’s representative account. Account
holdings and weights may differ from this representative account. The representative account holdings are subject to change without notice. This information is supplemental and
complements the GIPS Report on composite performance found on the last pages of this document. It should not be assumed that future results will be reflective of past performance.Lower Risk By Most Measures – International Growth
Downside Sharpe Information
Capture Ratio Ratio
0
25
50
75
100
31st Percentile 31st Percentile 50th Percentile
Rank 11 of 33 Rank 11 of 33 Rank 17 of 33
77.7% 0.79 0.88
Data is from 3/1/2015 to 6/30/2021. Source is eVestment. Universe is eVestment ACWI ex-US Large Cap Growth Equity. Peer size is 33. Peer universe data and SGA data based on monthly
gross returns and do not reflect the deduction of investment advisory fees. SGA’s fees are available upon request and also may be found in Part 2A of its Form ADV. Actual fees charged to
clients may vary depending on, among other things, the applicable fees schedule and portfolio size. It should not be assumed that future results will be reflective of past performance. 7Downside Capture
Down Years Since Inception Upside & Downside Capture
Gross Net
SGA International WRAP (Gross)
SGA International WRAP (Net) 103%
94%
MSCI ACWI ex-USA
-4.6%
-7.0%
-10.3%
-12.4%
-14.2%
-15.0%
78%
84%
2015* 2018 Upside Downside
*Partial year. SGA International Growth WRAP composite inception is 3/1/2015. Data as of 6/30/2021. MSCI ACWI ex-USA is Net Total Return (reinvest dividends after the deduction of
withholding taxes). Returns (gross and net of fees through 6/30/2021) are those of the SGA International Growth WRAP Composite. Returns reflect the reinvestment of dividends, interest and
other earnings. For interest and capital gains, SGA does not withhold taxes, for dividends SGA will withhold taxes as reported by the client’s custodian. The Net Returns are calculated based
upon the highest published fees. The net performance has been reduced by the amount of the highest published fee that may be charged to SGA clients, 3.00%, employing the International
Growth WRAP equity strategy during the period under consideration. Actual fees charged to clients may vary depending on, among other things, the applicable fees schedule and portfolio
size. SGA’s fees are available upon request and also may be found in Part 2A of its Form ADV. This information is supplemental and complements the GIPS Report on composite
performance found on the last pages of this document. Upside and Downside capture based on monthly gross returns compared to the MSCI ACWI ex-USA Net TR Index, since inception of 8
the SGA International Growth WRAP composite. Past performance does not guarantee future results.Investment Team
Analysts and Portfolio Managers
Tucker Brown Julian Cochran George Fraise HK Gupta
Analyst, PM Analyst Analyst Analyst, PM
SGA Since 2006 SGA Since 2019 SGA Since 2003 SGA Since 2014
Alexandra James Li, CFA Peter Madej, CMT Gordon Marchand,
Lee, MD CFA
Analyst, PM Analyst Analyst Analyst, PM
SGA Since 2004 SGA Since 2019 SGA Since 2005 SGA Since 2003
Kishore Rao Jon Richter Rob Rohn Luying Wang, CFA
Analyst, PM Analyst Analyst, PM Analyst
SGA Since 2004 SGA Since 2019 SGA Since 2003 SGA Since 2017
PORTFOLIOS
U.S. Global Emerging Markets International Global Mid Cap
Gordon Marchand, CFA HK Gupta HK Gupta Tucker Brown HK Gupta
Kishore Rao Gordon Marchand, CFA Kishore Rao Alexandra Lee, MD Kishore Rao
Rob Rohn Rob Rohn Rob Rohn Gordon Marchand, CFA Rob Rohn
9Five Flagship Portfolios
One Qualified Company List
US Global EM Intl. Global
Growth Growth Growth Growth Mid-Cap
Since 2000 Since 2011 Since 2014 Since 2015 Since 2018
Focused version Focused version
available available
10Investment Approach
Structured to manage risk across three pillars
Lower Lower Lower
Business Risk Human Risk Price Risk
Selectivity in Team-based Discipline in
company approach valuation
identification
11Company Identification
1000+
≈200
Universe of
Thousands Research ≈110
Coverage List Qualified
Company List
Analysts seek the best Actively monitor ≈200 Continuous due diligence
companies worldwide: companies that potentially (including valuation) of ≈110
conferences, trade shows, meet SGA criteria and/or direct companies that meet SGA
company ecosystems and competitors and ‘ecosystem’ quality and growth criteria
screens companies
12Research Process
1 2 3 4 5
Idea Due Qualified Valuation Client
Formation Diligence Company Portfolios
List
Analysts Deep Investment Relative to Concentrated
present idea for fundamental concept other QCL 25-35 stock
analysis to IC analysis, 10Y presented to IC companies portfolios
financial for inclusion on based on cash providing best
‘Go/No Go’
projections the ‘buy-list’ flows and combination of
conviction valuation,
Time: 2 – 6 Requires 2 of 3
quality and
months Executive
growth
Committee
Members’
approval
13Lower Business Risk
Key Investment Criteria
High degree of predictability
in their business
Repeat
Revenues
Able to consistently Long duration of
price profitably sustainable growth
Pricing Global
Power Opportunity
Management Financial
Execute responsibly and Strength Strength High returns on capital
good stewards of shareholder and strong cash-flow
capital generation
14Reducing Business Risk
What We Seek Frequently-replenished, CPGs
trusted consumables Medical/industrial supplies
Companies possessing the
characteristics we seek can be
found across numerous industries Frequently-visited, Differentiated retailers and
with shared traits nationally-branded store restaurants
chains
Self-reinforcing, frequently Financial transaction
toll-taking networks processors
Consumer internet
Contractually-recurring, Software-as-a-service
essential service providers Industrial gases
This information contains the opinions of SGA which are subject to change without notice and should not be considered as investment advice, a recommendation to purchase or sell a
specific security or as indicative of the investment performance of our portfolio. A complete list of all securities recommended for the strategy in the preceding year can be obtained free of
charge by contacting SGA at (203) 348-4742.
15Reducing Business Risk
What We Avoid Lacking Pricing Power Commodity Producers (E&Ps,
Miners)
Given the selective nature of our Regulated Utilities
approach, there are certain
companies that typically do not Lacking Reliable Revenues or “Deep Cyclical” Manufacturers
meet our requirements Transparency and Industrials
Commercial Lenders / Money
Center Banks
Tobacco
Lacking Long-term Most Traditional Retailers
Growth Most Traditional Media
This information contains the opinions of SGA which are subject to change without notice and should not be considered as investment advice, a recommendation to purchase or sell a
specific security or as indicative of the investment performance of our portfolio. A complete list of all securities recommended for the strategy in the preceding year can be obtained free of
charge by contacting SGA at (203) 348-4742.
16Lower Human Risk
Alignment to Client Outcomes
Broadly-held equity
>50% of employees own equity;
no one individual holds > 5%
Co-Investment
Across the team into SGA Funds
Rewards tied to client outcomes
Equity, performance shares and career
opportunities determined by contribution to client
performance
Unique remuneration system
No subjective ‘bonus’ payments
17Lower Human Risk – Cultural Values
Embedded to manage behavior finance risks
Maximizes process
discipline
Three
Portfolio
Managers
Perpetuates deep Ensures rigorous
research-first culture debate
Analysts Dual Analyst
First Coverage
Equity Global
Institutionalizes dissent Compensation Generalists Drives best ideas,
and client alignment portfolio management
thinking
18Lower Price Risk
Earnings are easily manipulated
Cash is What would you pay today for
this future stream of predictable
King
cash-flows?
All valuation models are
proprietary; no use of
sell-side estimates
Valuations Volatility =
Matter Opportunity
Price volatility provides
opportunities to increase
the growth profile of the
portfolio without
compromising on quality
19Valuations
10-year DCF Current CFATS
using 1 of 5 risk ÷
rates Market
Capitalization
Intrinsic
Value
INTERMEDIATE TERM
Analyst Price Targets
2-3y price targets using multiples
Cash Flow Available to Operating Sustaining Unfunded
CAPEX
Shareholders (CFATS) Cash Flows Acquisitions Obligations
20Portfolio Construction
Stock Level Benchmark Consideration
Extensive, first-hand research We never own a neutral conviction stock for
diversification or active risk objectives
Selective criteria
Bottom-up process with top down review
Team vetting
>100 Qualified Company List 25-35 Portfolio
Valuation considerations
2 of 3 PM approval
Portfolio
25 – 35 holdings 40% maximum sector exposure
Conviction based sizing 25% maximum industry exposure
‐ 4 – 6% above-average weight Focus on source of revenue generation
‐ 3 – 4% average weight 35% maximum emerging market domiciled company exposure
‐Sell Discipline
Fundamental
Valuation
Deterioration/ Forced Attrition
Consideration
Mistake
Structural decline of a company’s We will trim or remove a position When a current holding becomes
pricing power, competitive from the portfolio if it appears less attractive relative to another
advantage, long-term secular growth overpriced on our cash flow-based company on our Qualified Company
rate, or any other fundamental valuation system on an absolute basis List, we will sell the holding to make
erosion that lowers the long-term or relative to other candidates for room for the new portfolio addition.
sustainability of a company’s cash portfolio inclusion from the Qualified
flow growth. Company List.
These are general portfolio construction and risk management guidelines that may be revised in order to satisfy clients’ specific portfolio mandates. Portfolio construction parameters are
subject to change.
22Portfolio Holdings
Communication Services 3.6% Health Care 21.1%
Tencent China 3.6% Steris Ireland 4.7%
Novo Nordisk Denmark 4.1%
Consumer Discretionary 10.7% Shandong Weigao China 3.8%
Alibaba China 3.6% Alcon Switzerland 3.4%
Adidas Germany 3.2% Medtronic Ireland 2.9%
MercadoLibre Argentina 2.0% Sysmex Japan 2.2%
New Oriental Education China 1.9%
Industrials 5.7%
Consumer Staples 22.0% Recruit Japan 3.0%
Heineken Netherlands 4.3% IHS Markit United Kingdom 2.7%
L'Oreal France 4.0%
Wal-Mart de Mexico Mexico 3.7% Information Technology 16.7%
FEMSA Mexico 3.5% Infosys India 4.0%
Nestle Switzerland 3.3% Temenos Switzerland 3.8%
Diageo United Kingdom 3.2% Dassault Systemes France 3.7%
SAP Germany 3.0%
Financials 15.3% Adyen Netherlands 2.2%
Aon Ireland 5.8%
AIA Group Hong Kong 4.9% Materials 3.9%
HDFC Bank India 4.6% Linde United Kingdom 3.9%
Cash 1.0%
Representative portfolio weights as of 6/30/2021. Portfolio holdings are subject to change daily. Under no circumstances does the information contained within represent a recommendation
to buy or sell securities. It should not be assumed that investments in the securities were or will be profitable. The list provided may not represent all of the securities recommended for
advisory clients. A complete list of all securities recommended for the strategy in the preceding year can be obtained free of charge by contacting SGA at (203) 348-4742. This information is
supplemental & complements the GIPS Report on composite performance found on the last pages of this document. It should not be assumed that future results will be reflective of
past performance. 23Performance – SGA International Growth WRAP
Annualized Returns
Q2 YTD Since
Cumulative Returns 2021 2021 1-Year 3-Year 5-Year Inception
SGA International Growth (Gross) 7.4% 8.4% 34.3% 16.6% 16.1% 12.1%
SGA International Growth (Net) 6.6% 6.8% 30.4% 13.2% 12.7% 8.8%
MSCI ACWI ex-USA 5.5% 9.2% 35.7% 9.4% 11.1% 6.6%
Gross Relative Return +1.9% -0.8% -1.4% +7.2% +5.0% +5.5%
2015
Calendar Year Returns 2020 2019 2018 2017 2016 (Partial)
SGA International Growth (Gross) 25.5% 31.0% -12.4% 37.8% 0.6% -4.6%
SGA International Growth (Net) 21.9% 27.2% -15.0% 33.9% -2.3% -7.0%
MSCI ACWI ex-USA 10.7% 21.5% -14.2% 27.2% 4.5% -10.3%
Gross Relative Return +14.8% +9.5% +1.8% +10.6% -3.9% +5.7%
Returns (gross and net of fees through 6/30/2021) are those of the SGA International Growth WRAP Composite. MSCI ACWI ex-USA and MSCI ACWI Growth ex-USA returns are Net Total
Return (MSCI Net Total Return indexes reinvest dividends after the deduction of withholding taxes). Composite inception is 3/1/2015. Returns reflect the reinvestment of dividends, interest and
other earnings. For interest and capital gains, SGA does not withhold taxes, for dividends SGA will withhold taxes as reported by the client’s custodian. The Net Returns are calculated based
upon the highest published fees. The net performance has been reduced by the amount of the highest published fee that may be charged to SGA clients, 3.00%, employing the International
Growth WRAP equity strategy during the period under consideration. Actual fees charged to clients may vary depending on, among other things, the applicable fees schedule and portfolio
size. SGA’s fees are available upon request and also may be found in Part 2A of its Form ADV. This information is supplemental and complements the GIPS Report on composite 24
performance found on the last pages of this document. Past performance does not guarantee future results.Portfolio Positioning Summary
Market Value SGA ACWI ex-USA Diff.
3Y EPS Growth Rate 5-10% 10-15% 15-20% 20%+
$50 Billion + 73.7% 47.8% +25.9%
Allocation 11% 38% 22% 29%
$25 – 50 Billion 6.1% 19.5% -13.4%
C/E 93% 92% 74% 66%
$15 – 25 Billion 10.6% 11.8% -1.2%
EY 3.8% 2.9% 2.1% 1.5%
$5 – 15 Billion 9.6% 18.3% -8.7%
Fwd. 3 YR Rev. 12% 8% 11% 11%
< $5 Billion 0.0% 2.5% -2.5%
Sector Allocation SGA ACWI ex-USA Diff.
Communication Services 3.6% 6.7% -3.1%
Consumer Discretionary 10.7% 13.8% -3.1%
Revenue Domicile
Consumer Staples 22.0% 8.5% +13.5%
Emerging Energy 0.0% 4.5% -4.5%
Emerging
46%
31% Financials 15.3% 18.6% -3.3%
U.S. Health Care 21.1% 9.3% +11.8%
25%
Industrials 5.7% 11.8% -6.1%
Non U.S. Information Technology 16.7% 12.9% +3.8%
Developed
Non U.S. Developed 29% 69% Materials 3.9% 8.3% -4.4%
Real Estate 0.0% 2.6% -2.6%
Utilities 0.0% 3.0% -3.0%
Cash 1.0% 0.0% +1.0%
Data as of 6/30/2021. Source: Bloomberg, FactSet, SGA Estimates and Adjustments and representative portfolio. Earnings growth rates are based upon SGA estimates of portfolio companies
non-GAAP operating earnings. EPS calculations exclude companies with earnings going from (i) positive to negative or (ii) negative to positive, year to year. SGA C/E ratio and Enterprise
Yield projected. Holdings/weights are subject to change without notice and should not be considered to be investment advice, a recommendation to purchase or sell a specific security or as
indicative of the investment performance of SGA's portfolio. This information is supplemental and complements the GIPS Report on composite performance found on the last pages of this
document. It should not be assumed that future results will be reflective of past performance. 25Portfolio Characteristics
Quality SGA ACWI ex-USA
Annualized Earnings Growth
SGA International vs MSCI ACWI ex-USA (p.a.) Cash/Earnings Ratio 92% 66%
Gross Margin 49% 38%
25%
SGA International Debt/EBITDA 2.4x 4.3x
20% 17.9%
18.8%
MSCI ACWI ex-USA Net Debt/Market Cap 6% 36%
15% Earnings Variability 7.5% 26.3%
11.1%
10% 8.3%
6.2% 5.7% Characteristics SGA ACWI ex-USA
5%
Weighted Mkt Value $137B $106B
0% Median Mkt Value $76B $10B
-5% Number of Holdings 28 2,348
-5.4%
% in Top Ten 44% 12%
-10%
% Cash 1.0% -
-15% Active Share 92% -
-16.4%
-20%
Since Inception Last 3Y Next 3Y Next 3Y
(Mar-15) (2018-20) (Estimate) Revenue
(Estimate)
Source: Bloomberg, FactSet, SGA Estimates and Adjustments. Data as of 6/30/2021. Historical growth rates for MSCI ACWI ex-USA is sourced from MSCI and Bloomberg. MSCI ACWI ex-
USA estimates and characteristics sourced from Bloomberg and FactSet using MSCI data. C/E Ratio exclude financials. SGA C/E ratio projected. SGA weights and characteristics are based on
a representative account. SGA EPS Growth data is based upon portfolio companies non-GAAP operating earnings. EPS calculations exclude companies with earnings going from (i) positive
to negative or (ii) negative to positive, year to year. Variability of Earnings is calculated using standard deviation of annual EPS growth, since inception 3/1/2015. All accounts are modeled in
line with SGA’s representative account. Account holdings and weights may differ from this representative account. The representative account holdings are subject to change without notice.
This information is supplemental and complements the GIPS Report on composite performance found on the last pages of this document. It should not be assumed that future results 26
will be reflective of past performance.Revenue Growth
Historical Revenue Growth
Estimates
300
SGA International
ADR
11.1% p.a.
250
SGA International
11.1% p.a.
200
150
100
MSCI ACWI ex-USA MSCI ACWI
50 -2.5% p.a. ex-USA
5.7% p.a.
0
2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Source: SGA estimates, Bloomberg, and FactSet as of 6/30/2021. This information is supplemental & complements the GIPS Report on composite performance. It should not be assumed
that future results will be reflective of past performance.
27Correlation to Volatility
Our strategy has been rewarded during periods of heightened volatility
20%
15%
SGA Rolling 1Y Excess Return
10%
5%
0%
-5%
-10%
0% 5% 10% 15% 20% 25% 30%
Rolling 1Y Standard Deviation of MSCI ACWI ex-USA
SGA International Growth Portfolio
– Trendline
Source: FactSet, MSCI and SGA calculations. Rolling 1-Year Excess Return and Standard Deviation based on gross monthly return observations from 3/1/2015 – 6/30/2021.
This represents 65 rolling 1-Year observations over this period. SGA International Growth WRAP composite inception is 3/1/2015. Past performance is no guarantee of
future results.
28Portfolio Valuation – Enterprise Yield
Enterprise Yield = (Op Cash Flow – Cap X – Acquisitions – Unfunded Obligations ) / Market Capitalization
8
6
4
2
0
-2
-4
-6
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
SGA U.S. LCG 2.5% SGA INTL 2.5% U.S. 10YR Bond Yield 1.5% U.S. LCG Less 10YR Bond Yield 1.0%
Data as of 6/30/2021. U.S. data for SGA’s longest tenured account. The record presented for the period between April 1, 2000 to July 1, 2003 occurred prior to the inception of SGA, and
represents the record established by two of SGA’s founders (and investment committee members) Gordon Marchand and George Fraise while affiliated with a prior firm. The data for all
prior periods is data obtained from the John Hancock U.S. Global Leaders Fund (during which Gordon Marchand served as one of the fund’s portfolio managers) and is provided for
informational purposes only and does not constitute part of SGA’s portable record. International data for international portfolio since inception (3/1/2015). SGA Enterprise Yield (EY) is a
proprietary measure of the projected free cash flow truly available to investors as a percentage of market value (CFATS / Market Capitalization). SGA EY prior to 2005 utilizes a forward
looking simple average of actual cash flows, from 2005 SGA EY utilizes projected cash flows. EY estimates vs. 10-Year Treasury Bond (represents the risk free rate and the benchmark against
which all long duration assets must be measured). This information is supplemental and complements the GIPS Report on composite performance found on the last pages of this document.
29
It should not be assumed that future results will be reflective of past performance.Performance Tailwinds and Headwinds
SGA’s philosophical discipline produces a portfolio with strong and resilient revenue,
earnings and cash flow growth through all phases of the business cycle.
There will be periods when relative There will also be periods when
performance tends to outperform relative performance lags the
the market. benchmark.
Periods of rising volatility when Speculative or momentum-driven periods
attractively-valued, cash-flow of falling volatility when valuation
compounders are rewarded discipline goes unrewarded
Macroeconomic ‘downturns’ when Macroeconomic ‘snapbacks’ when
higher-quality, economically-resilient lower-quality and highly-cyclical
companies are appreciated companies experience relief rallies
SGA’s approach nonetheless typically
provides strong absolute returns during
such periods.
SGA International Growth WRAP Composite inception is 3/1/2015. The primary benchmark for the SGA International Growth composite is the MSCI ACWI ex-USA. MSCI ACWI ex-USA is Net
Total Return (MSCI Net Total Return indexes reinvest dividends after the deduction of withholding taxes). Past performance does not guarantee future results.
30Analysts / Portfolio Managers
Tucker is an Analyst, Portfolio Manager, Principal and a member of the Investment Committee. Tucker has been with the firm
since 2006. Prior to joining Sustainable Growth Advisers, Tucker was a Vice President in the Equity Research Department of
Tucker Goldman Sachs, where he served as a member of the firm’s U.S. packaged food research team. Previously, Tucker worked in
Brown the Investment Banking Division of Goldman Sachs, focused on M&A and corporate finance advisory for clients in retail and
technology sectors. Tucker began his career as a fund accountant and custody manager at Brown Brothers Harriman &Co.
Tucker has a B.A. in Economics from Bucknell University and an M.B.A. from The Wharton School.
Julian is a Research Analyst and a member of the Investment Committee. Prior to joining Sustainable Growth Advisers in 2019,
Julian was a Senior Equity Analyst at First Investors, where he covered the healthcare industry for seven years. Prior to First
Julian Investors, Julian was an Equity Research Associate at the boutique healthcare research firm Leerink Partners. Julian began his
Cochran career as an Investment Banking Analyst at JP Morgan, and later transitioned to an Associate role within the Corporate
Mergers and Acquisitions Group. Julian holds an MBA from The Wharton School and a bachelor’s degree in finance and
accounting from the University of Michigan.
George is a Founding Principal and a member of the Investment Committee. He is also a member of the firm’s Advisory
Board. George has been with the firm since 2003. Prior to founding Sustainable Growth Advisers with Gordon Marchand and
Rob Rohn, George was Executive Vice President of Yeager, Wood & Marshall, Inc since 2000 where he was a member of the
George Investment Policy Committee, a member of the Board of Directors and co-manager of the John Hancock U.S. Global Leaders
Growth Fund and the U.S. Global Leaders Growth Fund, Ltd, an offshore fund. George began his investment career in 1987 as
Fraise an equity analyst at Drexel Burnham Lambert. In 1990, he joined Smith Barney as a senior analyst responsible for the
coverage of electrical equipment stocks. He also held a senior analyst position at Chancellor Capital Management. In 1997,
George joined Scudder Kemper Investments where he was Senior Vice President and co-manager of the Scudder Large
Company Growth Fund. George has a B.A. from Trinity College and an M.B.A. in Finance and International Business from the
Stern School of Business at New York University.
HK is an Analyst, Portfolio Manager, Principal and a member of the Investment Committee. HK has been with the firm since
2014. Prior to joining Sustainable Growth Advisers, HK was a Senior Analyst at MDR Capital Management, a long / short equity
hedge fund, and an Associate Managing Director at Iridian Asset Management. HK followed the Technology,
Hrishikesh Telecommunications, Industrials, Basic Commodity and Refiners sectors while at MDR and Iridian. He also worked as an
Investment Banking Associate at Bank of America Merrill Lynch, and advised industrials and financials’ clients on private
(HK) Gupta placements and M&A. Prior to that, HK spent three years in industry as a Product and Program Manager at Amazon.com and,
as part of their strategic executive division, led the launch of Amazon’s Japanese and German merchant platforms. HK holds a
Bachelor’s degree in Computer Science from Indian Institute of Technology (IIT) in Bombay, an MS in Computer Science from
the University of California, San Diego and an MBA with specialization in Corporate Finance from the Stern School of Business
at NYU. He is fluent in Hindi.
31Analysts / Portfolio Managers
Alexandra is an Analyst, Portfolio Manager, Principal and a member of the Investment Committee. Alexandra has been with
the firm since 2004. Prior to joining Sustainable Growth Advisers in March 2004, Alexandra was an Associate Director and an
Alexandra equity analyst at Bear Stearns, where she was responsible for coverage of large cap biotechnology companies and served as a
Lee member of the firm’s global healthcare research team. Previously, she was employed at JP Morgan as an equity research
analyst, and at the Boston Consulting Group as a management consultant. Alex has an M.D. from Yonsei University in Korea
and an M.B.A. from Harvard Business School.
James is a Research Analyst and a member of the Investment Committee. Prior to joining Sustainable Growth Advisers in 2019,
he was an Equity Research Analyst at Point72 Asset Management where he was responsible for covering global automotive
and industrial technologies sectors. Before Point72, James was an Investment Banking Senior Associate at Citigroup, where he
James
was responsible for M&A and corporate finance advisories for global industrials companies. James began his career as a
Li Global Markets Analyst at Citigroup where he rotated through interest rate options trading, credit research and corporate
derivatives sales desks. James has a Bachelor’s degrees in Economics and Computer Science from Duke University, an MBA
from Columbia Business School, and is a CFA® charterholder. He is fluent in Mandarin Chinese.
Pete is a Research Analyst and a member of the Investment Committee. He is responsible for obtaining and disseminating
Peter relevant information on companies of interest from a wide variety of sources, as well as supporting SGA’s valuation model and
related investment tools. Pete has been with the firm since 2005. Prior to joining SGA, Peter was Vice President of Client
Madej Services at Valenzuela Capital Partners LLC, where he directed the client servicing effort. From 1992 to 2001 Peter was a
Senior Marketing Associate at Avatar Investors Associates, where he acted as liaison with institutional clients and all investment
management consultants. Pete has a B.A. in Economics and Comparative Literature from Williams College.
Gordon is a Founding Principal, an Analyst, a Portfolio Manager and a member of the Investment Committee. He is also a
member of the Advisory Board. Gordon has been with the firm since 2003. Prior to founding Sustainable Growth Advisers
with George Fraise and Rob Rohn, Gordon was an executive officer, a member of the Investment Policy Committee and a
Gordon member of the Board of Directors at Yeager, Wood & Marshall, Inc. since 1984. He was also the firm’s Chief Operating and
Marchand Financial Officer. Gordon began his career as a management consultant for Price Waterhouse. He is a CFA® charterholder, a
Chartered Investment Counselor (CIC) and a Certified Public Accountant (CPA). Gordon is past Chairman, President and a
member of the governing Board of the Investment Adviser Association. Gordon has a B.S. from Georgetown University, an
M.B.A. from the University of Massachusetts and completed graduate study at Oxford University.
32Analysts / Portfolio Managers
Kishore is an Analyst, Portfolio Manager, Principal and a member of the Investment Committee. Kishore has been with the
firm since 2004. Prior to joining Sustainable Growth Advisers, Kishore was a member of the investment team at Trident
Capital, a venture capital firm managing a portfolio of software, technology, and business service companies. He was a
Kishore
Founder and General Manager of the Street Events division of CCBN before it was sold to Thomson Reuters. Previously,
Rao Kishore was an Investment Analyst at Tiger Management following healthcare services and software companies and an
Analyst at Wellington Management following semiconductor equipment. Kishore has a B.S. in Industrial Management from
Carnegie Mellon University and an M.B.A. from Harvard Business School.
Jon is a Research Analyst and a member of the Investment Committee. Prior to joining Sustainable Growth Advisers in 2019,
Jon was a Research Analyst at Balyasny Asset Management, and a Vice President and Research Analyst at Indus Capital. Jon
covered Asian internet, technology and consumer companies while at Balyasny and Indus. Jon began his career in the
Jon
Associate program at Dodge & Cox, where he covered global computer software and hardware companies. Jon has a BSc
Richter with a concentration in Finance from the Wharton School, a BA in International Studies and East Asian Languages and
Cultures from the University of Pennsylvania’s College of Arts and Sciences, and an MBA from the Stanford Graduate School
of Business, and studied as a Fulbright Fellow at Peking University. He is fluent in Mandarin Chinese.
Rob is a Founding Principal, an Analyst, a Portfolio Manager and a member of the Investment Committee. He is also a
member of the Advisory Board. Rob has been with the firm since 2003. Prior to founding Sustainable Growth Advisers with
George Fraise and Gordon Marchand, Rob was a portfolio manager and principal with W.P Stewart & Co, Ltd., a firm noted
Rob for managing large-cap, high quality growth stock portfolios. During Rob’s twelve year tenure with W.P. Stewart, he was CEO
Rohn of the firm’s core U.S. investment business and before he resigned, Chairman of the Management Committee. From 1988
through 1991, he was a Vice President with Yeager, Wood & Marshall, Inc., where he was a member of the Investment Policy
Committee with responsibilities in equity analysis and portfolio management. Rob began his career in 1983 at Morgan
Guarantee Trust Company where he was an officer in Corporate Finance. Rob has a B.A. (Cum Laude) from Dartmouth
College and an M.B.A. from Harvard Business School.
Luying is an Analyst, Principal and a member of the Investment Committee. Prior to joining Sustainable Growth Advisers in
2017, Luying was a financial business analyst at PIMCO, working on portfolio analytics and risk management. Prior to that,
Luying Luying spent three years with Deloitte Consulting, providing business and technology solutions for clients in the financial
Wang services sectors. She holds a Bachelor’s degree in Automation from Tsinghua University in Beijing, China, an MS in Industrial
and Operations Engineering from The University of Michigan, Ann Arbor, an MBA in Finance and Economics from The
University of Chicago Booth School of Business, and is a CFA® charterholder. She is fluent in Mandarin Chinese.
33Client Portfolio Managers
Peter is a Client Portfolio Manager, responsible for supporting the firm’s client service and business development efforts, with
a focus on the firm’s broker/dealer and platform relationships. Additionally, he assists with the development and distribution of
Peter SGA’s client communications. Peter joined SGA in 2014 after completing his Master of Science degree in Finance at the
Knudsen Northeastern University D’Amore-McKim School of Business where he also served in positions as a Teaching and Research
Assistant. Prior to this, he earned a Bachelor of Science in Business Administration Magna Cum Laude with a focus in
Accounting from Peru State College. Peter is a CFA® charterholder.
Deana joined the firm in 2019 as a Client Portfolio Manager and Director of SGA Australia, responsible for developing and
servicing relationships with institutional clients and consultants. Prior to joining SGA, Deana was a Senior Research Analyst at
Perpetual Ltd, a prominent Australian financial services company. As part of Perpetual's multi-manager investment team, she
Deana was responsible for sourcing, researching and recommending external fund managers across global equities and alternative
Leong investments. Before joining Perpetual in 2014, she was an Investment Analyst at Ibbotson Associates (now Morningstar
Investment Management) and has also held roles across operations and client service in Australia and the UK. Deana holds a
Bachelor of Commerce with majors in Finance and Economics from the University of Sydney and has passed the Level II exam
of the CFA® program.
David joined SGA in October 2019 as a Client Portfolio Manager. David was employed by Willis Towers Watson as a Portfolio
Manager and Head of Global Equity Research for approximately 8 years during which he researched and ranked Global equity
managers. David launched and managed WTW’s Global Equity Focus Fund, which grew to over $6bn and also managed
Alliance Trust, a UK quoted investment trust which adopted the same concentrated, multi-manager approach. David worked
David closely with the team at SGA through his research and portfolio management responsibilities. Earlier in his career, David was
Shapiro Deputy CIO of Stamford Associates, overseeing their research and client relationships and prior to this he held roles as a UK
equity portfolio manager for several firms including UBS Asset Management (formerly Phillips and Drew), Aviva Investors
(formerly Morley Fund Management) and Universities Superannuation Scheme. Prior to his career in investment management,
David worked as an investment analyst for two stockbroking firms. David has a Bachelor of Commerce degree from the
University of Birmingham and is a Member of the Chartered Institute for Securities & Investment.
Steve is a Client Portfolio Manager and member of the Investment Committee, responsible for client and consultant
communication. Steve has been with the firm since 2014. Steve was employed by Russell Investments as a Portfolio Manager
Steve and Head of US Equity Research for approximately 14 years during which he researched and ranked US equity managers and
or multi-manager US equity portfolios. Prior to joining Russell Investments, Steve was Director of Benefits Finance and
Skatrud Investment at Harnischfeger Industries. He also was Assistant Treasurer at Marquette University where he was responsible for
overseeing the University’s endowment, charitable trusts and short-term investments. Steve is a CFA® charterholder. He has
a Master of Business Administration, Finance/Marketing from Washington University in St. Louis, and a Bachelor of Arts,
Economics/Management from Beloit College, Beloit, WI.
34Annual GIPS Report – International Growth WRAP
Total Return 3 Year Standard Deviation
MSCI
MSCI ACWI MSCI ACWI Total Assets in
ACWI Total Firm Assets Percentage
Before MSCI ACWI ex-USA Growth ex- Number of Composite SGA Growth ex- Composite at Percentage of non-
Period After Fees ex-USA at Period End of WRAP
Fees Net TR Index USA Net TR Portfolios Dispersion Composite USA Net TR Period End (USD fee paying accounts
Net TR (USD millions) accounts
Index Index millions)
Index
Mar. 1 - Dec. 31, 2015 -4.63% -7.00% -10.32% -6.77% Five or Fewer N/A 0.096 5,318 100% 0%
2016 0.65% -2.33% 4.50% 0.12% Five or Fewer N/A 0.097 5,672 100% 0%
2017 37.83% 33.85% 27.19% 32.01% Five or Fewer N/A 0.133 9,971 100% 0%
2018 -12.42% -15.04% -14.20% -14.43% Five or Fewer N/A 12.85% 11.38% 11.55% 89 9,096 0% 0%
2019 30.96% 27.16% 21.51% 27.34% Five or Fewer N/A 12.01% 11.34% 11.50% 307 12,347 0% 0%
2020 25.55% 21.90% 10.65% 22.20% Five or Fewer N/A 15.87% 17.93% 16.48% 310 18,780 0% 0%
Since Inception (March 1,
2015) 11.68% 8.40% 5.61% 8.86% 14.63* 15.29* 14.33*
N/A- Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.
3 Year Standard Deviation is not shown for 2015, 2016, and 2017 as 36 months of returns are not available
* Since Inception Annualized Standard Deviation. SGA Composite Dispersion based on Gross Returns.
Sustainable Growth Advisers, LP (“SGA”) was formed in 2003 and is a registered investment advisor under the Investment Advisers Act of 1940. SGA manages portfolios of publicly traded equity assets according to its “Large
Cap Growth Equity” investment approach for pooled funds, institutions, trusts and private accounts. SGA is an operationally independent investment management firm and an affiliate of Virtus Investment Partners. The SGA
International Growth WRAP Composite was created in March 2019. The firm maintains a complete list and description of all composites, which is available upon request.
Sustainable Growth Advisers, LP claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Sustainable Growth Advisers,
LP has been independently verified for the periods July 1, 2003 – December 31, 2019.
A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm's
policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been
implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
SGA International Growth WRAP Composite contains fee-paying and non-fee paying large cap international growth equity portfolios under full discretionary management of the firm. For comparison purposes the composite is
measured against the MSCI ACWI ex-USA TR Index (Net) and MSCI ACWI Growth ex-USA TR Index (Net).
The composite includes non-wrap accounts only, from 3/1/15 to 12/31/20.
The composite calculation has been appropriately weighted for the size of each portfolio on a time-weighted, total return basis. Monthly portfolio returns have been used in the construction of the composite. Results are based
on fully discretionary accounts under management, including those accounts no longer with the firm.
The U.S. Dollar is the currency used to express performance. Results are presented gross and net of management fees and include the reinvestment of all income. For interest and capital gains, SGA does not withhold taxes.
For dividends, SGA will withhold taxes as reported by the Client’s custodian. Returns are calculated net of withholding taxes on dividends. Wrap fees include management, transaction, custody and other administrative fees. The
Net Returns are calculated based upon the highest published fees. The net performance has been calculated by reducing the gross performance by the amount of the highest published wrap fee that may be charged to SGA
clients, 3.00%, employing the International Growth WRAP strategy during the period under consideration. Actual fees charged to clients may vary depending on, among other things, the applicable fees schedule and portfolio
size. SGA’s fees are available upon request and also may be found in Part 2A of its Form ADV. The annual dispersion presented is an asset-weighted standard deviation calculated using gross returns for the accounts in the
composite the entire year. Policies for valuing investments, calculating performance, and preparing GIPS Reports are available upon request. Past performance is no guarantee of future results.
The standard wrap fee schedule in effect is 3.00% on total assets. Actual investment advisory fees incurred by clients used in the composite may vary from the standard fee schedule.
Indices are unmanaged, hypothetical portfolios of securities that are often used as a benchmark in evaluating the relative performance of a particular investment. An index should only be compared with a mandate that has a
similar investment objective. An index is not available for direct investment and does not reflect any of the costs associated with buying and selling individual securities or management fees.
35Definitions And Disclosure Page
MSCI ACWI ex USA Index: The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 24
Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the US The index is calculated on a total return basis with
dividends reinvested. The Index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.
Gross Margin: A financial ratio indicating the percent of sales the company retains after incurring the direct costs associated with producing the goods and services it sells. Weighted
average of the gross margin for the underlying portfolio holdings.
Cash Flow / Earnings (C/E Ratio): A measure of proportion of earnings that is converted into cash (CFATS / Earnings). Cash Flow Available To Shareholders (CFATS) = Op Cash Flow –
Cap X – Sustaining Acquisitions – Unfunded Obligations (pensions, legal). Ratio is the weighted average of the underlying portfolio holdings, excluding companies in the Financials
sector.
Debt / Equity: A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Weighted average of the debt/equity ratios for
the underlying portfolio holdings.
Median Market Cap: The total dollar market value of all of a company’s outstanding shares. Median market cap for the underlying portfolio holdings.
Weighted Market Cap: The total dollar market value of all of a company’s outstanding shares. Weighted average of the market cap for the underlying portfolio holdings.
Growth Volatility: Measures the standard deviation of the EPS growth rates. Higher standard deviation suggests greater risk.
Active Share: A measure of the percentage of stock holdings in a manager’s portfolio that differ from the benchmark index.
Enterprise Yield (EY): A proprietary measure of the free cash flow truly available to investors as a percentage of market value (CFATS / Market Capitalization). Cash Flow Available To
Shareholders (CFATS) = Op Cash Flow – Cap X – Sustaining Acquisitions – Unfunded Obligations (pensions, legal). Ratio is the weighted average of the underlying portfolio holdings,
excluding companies in the Financials sector.
Forward 3-Year Earnings Growth: Weighted average of the estimated 3-year earnings growth for the underlying portfolio holdings.
Forward 3-Year Revenue Growth: Weighted average of the estimated 3-year revenue growth for the underlying portfolio holdings.
Sharpe Ratio: A risk-adjusted measure calculated using standard deviation and excess return to determine reward per unit of risk.
Information Ratio: A risk-adjusted measure calculated using standard deviation of excess returns and excess return to determine reward per unit of risk.
Downside Capture: A ratio calculated by taking the portfolio’s return during the periods of negative benchmark performance and dividing it by the benchmark return.
Standard Deviation: Measures variability of returns around the average return for an investment portfolio. Higher standard deviation suggests greater risk.
Beta: A quantitative measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Risks:
Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or
medium-sized companies may enhance that risk.
Limited Number of Investments: Because the portfolio has a limited number of securities, it may be more susceptible to factors adversely affecting its securities than a portfolio with a
greater number of securities.
Foreign & Emerging Markets: Investing in foreign securities, especially in emerging markets, subjects the portfolio to additional risks such as increased volatility, currency fluctuations,
less liquidity, and political, regulatory, economic, and market risk.
Geographic Concentration: A portfolio that focuses its investments in a particular geographic location will be sensitive to financial, economic, political, and other events negatively
affecting that location.
Market Volatility: Local, regional, or global events such as war, acts of terrorism, the speed of infectious illness or other public health issues, recessions, or other events could have a
significant impact on the portfolio and its investments, including hampering the ability of the portfolio manager(s) to invest the portfolio's assets as intended.
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