RSQ INTERNATIONAL EQUITY Strategy

AT RSQ, WE BELIEVE A DIVERSIFIED CORE PORTFOLIO, DRIVEN BY DYNAMIC SECTOR AND COMPANY FUNDAMENTAL ANALYSIS, IS THE KEY TO DELIVERING CONSISTENT, RISK-ADJUSTED, LONG-TERM PERFORMANCE IN THE INTERNATIONAL EQUITY MARKETS.

Strategy

Our investment approach is tailored to best fit the various regions of the world in which we invest as we search for tailwinds at a country, sector/industry or company level.

In the developed countries, we emphasize company-specific research paired with strong analysis of industrial sectors and niches within those sectors. We favor industries and sub-sectors characterized by favorable or improving demand / supply patterns. Within those sectors, we aim to invest in companies that are experiencing strong or improving demand for their products or services, which possess dominant competitive positions within their industry, or which are undergoing radical, positive fundamental change.

Thorough analysis of balance sheet, income statement, and cash flow information is an essential component of the bottom-up research process.

In the emerging markets, the investment process begins with top-down analysis of regional and country specific macroeconomic and geopolitical variables. Country weighting decisions within the emerging markets are heavily dependent on the top-down view. Individual companies are then selected for investment based on the same bottom-up review used in developed markets.

At RSQ, we analyze Japan using a hybrid approach, encompassing both top-down and bottom-up processes. The Japanese macroeconomic backdrop has an influence on the Advisor’s country weighting decision. However, Japan has many global companies active in the export industries, and bottom-up assessments versus non-Japanese competitors are the key determining factors that influence portfolio inclusion or exclusion.

Portfolio Construction

At RSQ, our process is fundamentally driven and built from the bottom-up. As part of our risk management process, we employ a number of guidelines and constraints to help diversify the risks inherent in any investment portfolio constructed through fundamental stock selection.

Portfolio Guidelines:
  • Typically 100 – 150 positions1
  • Maximum position size generally 5%
  • Typically 30+ countries
  • Maximum sector weight generally <= 200% of benchmark2
  • Typically <10% cash
  • Typically at least 65% of total assets in no fewer than three non- U.S. countries
  • Typically no more than 35% in emerging markets

1 May be higher or lower, depending on market circumstances

2 Maximum sector weights are the greater of twice the MSCI ACWI ex-US weight or the benchmark weight plus 10 percentage points. An exception is Financials, which is capped at 1.4 times the benchmark weight due to its large size. Minimum sector weights are 0%.