The secret of their success? Just buy good companies at good prices wherever you find them, and then hold onto them. “We’re very much bottom-up investors,
but we’re regionally and market-cap agnostic,” says Peirce, who co-manages the fund with Bill Kanko and Matias Galarce. Black Creek funds are available
through CI Investments Inc.
“We have a bias towards industry leaders with growing market share, and we seek to own the rights to their future cash flows over the long term,” Peirce
adds, noting that the fund’s turnover rate is typically in the high teens. “Of course, valuations may sometimes run ahead of themselves, or there may be
acquisitions, but typically we’ll hold a company for four or five years, sometimes longer.”
The fund will invest in everything from microcaps to megacaps, but it’s still a concentrated portfolio, averaging 25 to 30 names (the current roster
comprises 29). “Good micro-caps are harder to find, and they tend to be smaller holdings – typically 1 1/2% to 2% of fund assets,” says Peirce. “But we
look for businesses that have representation in many parts of the world, regardless of size and where they’re headquartered. Some of our holdings are
active in more than 100 countries.”
At present, 42% of the fund’s assets are invested in Europe, and while two of these holdings are based in the United Kingdom, Peirce isn’t concerned about
the impact of Brexit – quite the opposite, in fact. “[Dublin, Ireland-based]
will actually benefit,” she says. “Less than two percent of their revenue is in pounds, so the currency’s weakness provides translational benefits. It’s a
natural currency hedge.”
The fund’s biggest holding at 5% of assets – Paris-based Christian Dior SA (XPAR: CDI) – reflects the fund’s
investment approach. “This is a conglomerate of very aspirational brands, and it operates globally,” says Peirce. “We became interested when it was
available at a substantial discount because of concerns about Chinese gifting practices. But we felt this was a short-term concern that would dissipate
over the long term. That was the original rationale, and it’s doing well and still has an attractive valuation relative to its peers.”
Geographically, meanwhile, U.S. weighting (22% of assets) is the lowest it’s been in 35 years, according to Peirce. “Generally, U.S. companies are
expensive, and many are losing market share globally,” she says. “We don’t feel we have to be in every market. If we can’t find something better elsewhere,
we won’t be there.
“There’s also an element of financial engineering in the U.S., for lack of a better term,” Peirce adds. “Companies are borrowing to buy back shares, and
they aren’t retiring the shares, so they’re just offsetting their options.” Nevertheless, the fund does own a few “very much individual” U.S. companies,
such as Inovalon Holdings Inc. (NASDAQ: INOV), a
Bowie, MD-based health care technology company, and Carnival Corp. (NYSE: CCL), a global leader in the
As for the global outlook generally, Peirce urges a degree of caution. “We don’t invest with a macro overlay, but we aren’t ignorant of macro trends. We’ve
been advising our clients that we’re in a lower demand environment, and given valuation levels globally, they should expect lower returns than in the
Still, given Black Creek’s entry has consistently been near the top of the performance rankings among 258 global equity funds, with double-digit annualized
returns over the past five years (15.5%), slow and steady sounds pretty good.
is an experienced financial and business journalist and a frequent contributor to the Fund Library.
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