International and Global Equity Strategies


January 2024


In 2023, global markets exceeded expectations, with growth equities, especially in technology and communication services, showing a strong rebound. Despite initial reactions to inflation data and central bank policies, 2024 is anticipated to be a stable year of economic expansion, potentially marking the first full post-COVID year with normalized economic growth and inflation. The US is expected to lead this broad growth, with Europe following slightly behind, and Japan showing promising potential for accelerated growth.

Inflation and interest rates have been primarily affected by supply-side issues following the sudden halt in global economies due to the pandemic. This led to significant supply chain disruptions across various sectors, contributing to inflation spikes, particularly in housing in the US, energy in Europe, and food in Japan and in Asia more broadly. However, as these issues are resolving, inflation levels are expected to decrease, allowing for a potential reduction in interest rates.

Focusing on regional growth, Japan shows promising signs due to government initiatives aimed at improving corporate performance and growth. The Tokyo Stock Exchange’s reforms and the new tax-exempt Nippon Individual Savings Accounts are notable examples. In contrast, China’s economic growth didn’t surge as expected post-COVID restrictions, but its significant advancements in sectors like electric vehicle exports and technological fields indicate strong future potential.

On a larger scale, the anticipated fall in US interest rates and a weaker dollar could benefit emerging and international market equities. The fading dominance of the US dollar is expected to pave the way for better performance in these markets.

International Growth Strategy

The Pembroke International Growth Strategy outperformed the MSCI ACWI ex-US Small Cap Index in 2023. This was helped by a strong performance in the first half and fourth quarter of the calendar year. In the fourth quarter of 2023, the strong performance in both absolute and relative terms was driven by the prospect that central banks would cut interest rates earlier in 2024 than had originally been expected. Against this backdrop, global growth equities outperformed value equities by around 3.1% (as measured by the MSCI ACWI IMI Growth versus MSCI ACWI IMI Value indices).

From an attribution perspective, stock selection was broadly positive in the fourth quarter, particularly within the Industrials and Information sectors. The outperformance was partially offset by slightly weaker stock selection within Financials.

During the last quarter, exposure to Information Technology was increased with the addition of Technology One (TNE.AU). Technology One is an Australian company that has developed a vertical enterprise resource planning (ERP) solution with a dominant share of the Australian and New Zealand (ANZ) local government and higher education sectors. The company’s strong vertical focus has enabled it to steadily increase product penetration and its financial profile has improved with the transition to software as a service (SaaS). This was offset by a reduction in the Industrials sector, with the liquidation of Benefit One (2412.JT). Based in Japan, Benefit One is a provider of HR-related services in the form of outsourced employee benefits. We exited the position due to weakening fundamentals and management’s downgraded guidance for 2024.

Two stocks that made positive contributions to returns of the strategy over the past quarter

Within the Industrials sector, Bufab (BUFAB.SS), which is based in Sweden, boosted returns. Bufab is a leading supplier of low-priced components (C-parts; fasteners, screws, nuts and bolts) to the manufacturing industry. Bufab’s competitive advantages come from its ability to supply C-parts at the lowest cost, building on its scale and superior supply chain management. As the company grows (revenue target growth is above 10% with acquisitions), scale creates a virtuous circle of lower service costs and wide product availability. This, in turn, supports its competitive advantage and should enable further growth. The share price strengthened further after management raised its profitability target from 12% to 14%. In addition, management has initiated a strategic review that could include the possible sale of two of its manufacturing companies, Bufab Lann and Hallborn Metall.

The strong stock selection in IT was mainly driven by BE Semiconductor (BESI.NA). BESI is a leading supplier of assembly equipment with a focus on die attach, packaging and plating equipment. BESI has 25 years of experience and is the market leader in advanced packaging equipment (32% market share), which is sold to integrated device manufacturers (IDMs) (61% of 2019 revenues) and subcontractors (39% of 2019 revenues) to manufacture semiconductor chips. With its top ten customers accounting for 44% of 2019 revenues, the company is highly diversified. BESI should maintain its market leadership in advanced packaging in the medium to long term. The share price strengthened after the company reported solid third-quarter results, which boosted optimism for hybrid bonding systems, an emerging tool for connecting chips. The company said it has received new orders for such systems in the past and current quarters, and expects further bookings.

Two stocks that made negative contributions to returns of the strategy over the past quarter

The weakness in the Financials sector was largely driven by Beazley (BEZ.LN). Beazley is a well-managed specialty insurer with a long history of delivering shareholder value. This value has been driven by an attractive business mix, conservative reserving practices, above average investment gearing and an active approach to capital management. The share price fell on weaker third-quarter results, particularly after the company confirmed that its growth opportunities in 2024 appear to be slower than expected.

The Healthcare sector stock selection was also weaker, mainly due to Inmode (INMD.US). Inmode is an Israeli medical device company best known for developing proprietary minimally invasive and non-invasive technologies for various aesthetic applications, including fat reduction, skin tightening and muscle toning. The share price fell in the fourth quarter after the company missed its third quarter estimates, with management attributing the miss to greater seasonality, combined with tougher financing conditions for its customers. We exited our position in Inmode due to fundamental concerns, limited visibility and an unpredictable environment.

Global Equity Strategy

Pembroke’s Global Equity Strategy is a diversified global equity portfolio with exposure to Canadian, US, and international developed and emerging equity markets. The managers aim to maintain diversification by region, market capitalization size, manager and passive and active strategies. The strategy is benchmarked to a custom index consisting of a 64% weight in the MSCI All Country World Index (ACWI) and a 36% weight in the S&P/TSX Composite Index.

The strategy generated positive absolute returns in the fourth quarter of 2023, outperforming its bespoke benchmark, which gained slightly less in the quarter. Over the period, the strategy received positive relative contributions from the Pembroke Canadian Growth Fund, the Pembroke Dividend Growth Fund (see Canadian Strategies), the Pembroke US Growth Fund (see US Strategies) and the Pembroke International Growth Fund. The positive relative results were partially offset by the Pembroke Canadian All Cap Fund (see Canadian Strategies) and the Guardian Capital Global Equity Fund, which underperformed their respective benchmarks over the period.

Over the course of the twelve-month period ending December 31, 2023, the strategy ended the year significantly higher, but slightly behind its benchmark, which was also up over the period. All of the strategy’s geographic equity allocations and underlying funds contributed to absolute returns. On a relative basis, Canadian equities outperformed, while US and international equities underperformed their respective benchmark components.

The strategy invests in passive exchange traded funds (ETFs) to gain exposure to certain large capitalization liquid equity markets. At the end of the period, it held four equity market ETFs: the iShares Core S&P500 ETF, the iShares S&P/TSX 60 Index ETF, the iShares Core MSCI EAFE ETF, and the iShares Core Emerging Markets ETF.

In total, the strategy’s allocation to passively managed ETFs was approximately 27.4% at the end of December 2023. By region, around 38.6% of the Fund was allocated to Canada, 35.5% to the US, 10.0% to Europe, 2.0% to Japan and 13.3% to other regions. By sector, the strategy’s top holdings include Financials, Industrials, Information Technology and Consumer Discretionary.


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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.