International Equity Strategies


In the next year, the focus for Pembroke’s international strategy will be the transition of the economy and corporate profit growth as the economy normalizes to a post-pandemic world, or at least becomes more comfortable coping in a pandemic. While we are still in the middle of what we believe to be a long-term economic expansion, corporate profit growth has clearly peaked and will likely continue to decline sequentially.

European economy: Prior to the Russian-Ukraine conflict, Europe was on track for relatively stronger sequential growth as most European economies remain below their pre-pandemic output trajectory. The conflict between Russia and Ukraine significantly hampered those growth prospects in Europe.

Chinese economy: As China’s economy fully recovered by the end of 2020, growth in China decelerated materially 2021, to the point where macroeconomic policy is already becoming more supportive of near-term growth pick up on the margin. On December 6, 2021, the People’s Bank of China announced a 50-base-point rate cut, enabling banks to lend more. We expect China’s economy to accelerate gradually in 2022, as domestic policy is calibrated, to reach annual output growth of more than 6%.

International Growth Fund

The Pembroke International Growth Fund underperformed the MSCI ACWI ex-US Small Cap Index during the trailing 1-year performance period, as of March 31, 2022. Underperformance has been primarily due to a significant rotation in the market toward low valuation, low quality, and low growth companies in the first quarter of 2022. From an attribution perspective, this can be explained by weaker stock selection within the information technology sector, coupled with an underweight allocation to energy, and an overweight allocation to health care.

Two stocks that made positive contributions to returns of the Fund in the trailing 12-month period

Partially offsetting underperformance was positive stock selection within the industrials sector, driven by BayCurrent Consulting (“BYCRF”). BayCurrent is an information technology consulting business that differentiates itself from the broader market as a brand leader and localized solution who executes better than its peers. The key to its success has been hiring strong consultant talent and winning new clients. The overall market remains prime for market share gains. Estimates of mid-20s market growth for digital consulting reflect the great need for transformation across the Japanese enterprise, which we have highlighted as a key growth theme in our coverage. Baycurrent should be able to grow in excess of the market, given it small agile scale, along with a diversified upstream and downstream service offering.

Consumer staples stock selection was also positive, driven by a strong performance from Dino Polska (“DNP.WA”). Dino Polska is a leading Polish proximity supermarket chain that has built a strong track record of driving growth and investment returns on the back of competitive pricing, strong cost control, vertical integration (meat sourcing and real estate ownership), and an efficient logistics network. The company has also proven rapid network roll-out capabilities, and a differentiated offering focused on fresh and branded products. A solid macroeconomic environment in Poland, with favourable trends in retail, should also continue to be supportive of the stock.

Two stocks that made negative contributions to returns of the Fund in the trailing 12-month period

Within the information technology sector, dotdigital Group (“DOTD.L”) hampered returns. Dotdigital is the world’s largest independently owned marketing automation technology company. It sells cloud-based software to mid-sized companies that helps them send emails and marketing communications to their customers. The shift to digital marketing tools is structural and ongoing, which, along with measurable solutions, makes dotdigital’s product unique. However, slowing growth, execution issues, management departures, and headwinds to profitability have significantly weighed on share price performance. We exited our position in March 2022.

Communication services stock selection was weak, primarily due to Trustpilot Group (“TRST.L”). Trustpilot is a Danish consumer review website with around 120 million reviews on over 500,000 businesses. It is free for consumers to use, and it enables them to share experiences and provide feedback on companies. Full-year earnings were strong. However, management noted a higher level of spending in 2022, which weighed on the share price. We believe there is no change to the company’s strategy of prioritizing growth in the near-term and, at the margin, marketing investments are rising back toward pre-COVID levels, as the company hires and drives product adoption in new geographies, such as the US.


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This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.