Mr. Rolfe is a highly respected professional in the investment management and advisory industry, and has experience working with institutional investors throughout Australia, New Zealand and Asia. He brings a deep working knowledge of investment management requirements and portfolio implementation.

“Alex has a client-centric focus that is completely aligned with the William Blair culture, and we are pleased that he has joined our team,” said Dan Charles, global head of business development and client service. “We are excited about the opportunity to serve a fast-growing and sophisticated client base in Australia and New Zealand.”

Mr. Rolfe added, “William Blair has an impressive track record across various investment strategies, which I believe are well-suited for the Australian and New Zealand institutional market.”

Mr. Rolfe most recently spent more than three years as director, head of Asia Pacific, at Arrowstreet Capital in Sydney, Australia. Before that, he was Manager, Investments, at Commonwealth Bank Group Super. He received his B. Commerce degree with a double major in Finance, and Money, Banking, Trade and Finance from the University of Newcastle and is a Certified Investment Management Analyst^® professional.

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The William Blair Global Leaders Fund, earned a 4.25 star ‘superior’ rating while the William Blair Emerging Markets Leaders Funds earned a 4 star rating.

In its Funds research, SQM highlighted the strength of both the funds in bringing Willam Blair’s history as a long established funds management firm in the US with a strong pedigree in active management.

“Its in-depth fundamental analysis procedure, supplemented by objective scoring input from William Blair’s proprietary quantitative models allows for the identification of opportunities and potential risks,” said SQM.

Strong team cohesiveness was also identified as a strength of both funds. William Blair’s analysts and portfolio managers collaborate extensively on the composition of the Eligibility List and Research Agenda to ensure efficient processing of ideas and timely portfolio implementation,” said SQM.

Management fees of both funds were below the peer average.

Alex François, William Blair’s Head of Australia and New Zealand Institutional Distribution, said, “William Blair’s funds are offering quality investment opportunities to Australian investors in broader global markets and currencies and across geopolitical themes that are sometimes difficult to access. We are delighted to have earned these ratings from SQM which confirm that both of these Funds are superior.”

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Understanding Emerging Markets can help you help your clients.

The underperformance of emerging markets is making investors nervous, but understanding the situations that threaten emerging markets will help manage investor angst.

According to William Blair portfolio manager of Emerging Markets Strategies, Todd McClone, the characteristics of emerging markets gives them reactions to global economic change which are different to other asset classes, and therefore the impact on them is unlikely to be as simplistic as ‘chicken and egg’.

“A headline such as ‘End of the commodity boom’ is daunting to investors, but when you understand what this means for emerging markets, you can see they have unique traits that may in fact reduce or further explain this impact so that investors don’t become underweight to the sector.”

For example, Mr McClone says there are several explanations as to why the end of the commodity boom does not spell doom for emerging markets, including the fact that the impact of commodity sectors on emerging market equities has virtually already played out.

“The energy and materials sector weights in the MSCI Emerging Markets Index are now only at 13 percent, down from 38 percent at the peak of the commodity boom and almost on par with the MSCI World Index,” says Mr McClone.

Secondly, despite conventional wisdom that says falling commodity prices are negative for emerging markets, the reality is there are far more emerging markets that are beneficiaries of weaker commodity prices than those that are not.

Finally, the general perception that emerging markets and commodities are highly correlated is too simplistic. Mr McClone says it is true the correlation between commodity prices and emerging market equity prices significantly increased from 2005 to 2013, however this actually benefited commodity-producing countries in emerging markets and drove a general optimism regarding the asset class.

“It was a sort of rising tide that lifts all boats, not just emerging markets and drives correlations higher.”

Mr McClone says the state of the Chinese economy is another headline which is causing undue concern. He says the largest parts of the Chinese economy (the service- and consumer-related sectors) are strong while the weaker parts are showing signs of stabilization. In addition, the much-feared residential property market has been on a path to recovery for several months, responding well to stimulus measures taken late in 2014 and early 2015.

“We believe investor expectations of further devaluation have been overly bearish as four factors do not seem
to support a competitive devaluation argument: China’s record 2015 trade surplus of $600 billion, the health of the Chinese consumer, the absence of unemployment, and China’s relentless rising market share of global exports.”

Getting the full picture also means understanding disappointing economic growth in emerging market countries, which although it has declined, this is relative to developed markets.

“This [factor] is important because research shows relative GDP growth rates are a key factor in determining outperformance of emerging versus developed markets,” says Mr McClone.

Another area of concern for investors is the potential impact of U.S. interest-rate hikes and a stronger US dollar. However, Mr McClone says an analysis of historical Fed tightening cycles since 1969 shows that emerging markets have outperformed developed markets during most such cycles.

“The only exceptions occurred when tightening cycles were considered “violent”—that is, the rate increases came sooner than the market anticipated or were stronger than the market anticipated, or both,” he says.

Mr Mr McClone has authored a White Paper: What Has Everybody Been Worried About? A Closer Examination
of the Angst Surrounding Emerging Markets which is available here.

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Visiting Australia from London this month, William Blair partner, currency expert, and Dynamic Allocation Strategies (DAS) portfolio manager, Thomas Clarke, said that a number of emerging market currencies – including the Brazilian real, Indian rupee, Indonesian rupiah, Malaysian ringgit, Chinese yuan, South African rand, and Russian ruble – are considerably undervalued.

“These currencies therefore represent a currency valuation opportunity and it is an opportunity that has grown in magnitude since the middle of 2015,” Mr Clarke said. “However, William Blair’s investment process means that before we act on this ‘where to invest’ opportunity we take a long hard look at our ‘why’. In this case, the why involves understanding why the huge value/price discrepancies have opened up.”

Mr Clarke said there are two reasons, one of which is that the valuation opportunity, while seemingly wide, is actually quite concentrated.

“Almost universally we see emerging currencies attractive and developed currencies unattractive,” he said. “If there were an even spread of attractive and unattractive emerging market currencies, and an even spread of attractive and unattractive developed market currencies, for example, the valuation opportunity would be more diverse. As it is, the opportunity is simply not compelling enough.”

The other reason is that significant non-valuation headwinds, including William Blair’s macro themes and geopolitical risks, are currently pushing against the pull of valuation itself.

“For instance, our commodity super-cycle macro theme hurts the currencies of commodity exporters such as Brazil, South Africa, and Russia,” he said. “Our external financing vulnerability theme hurts currencies of countries with large balance of payment deficits, slow or negative growth, and/or problematic governance, including the fundamentally attractive Turkish lira, Brazilian real, South African rand, and Colombian peso. Slowing growth in China represents a headwind for Asian emerging market currencies, which would otherwise be very attractive.”

On the issue of geopolitical risks, Mr Clarke said several currently favour developed market currencies over emerging. “Geopolitical risks in the Ukraine and the Middle East, as analyzed through our game theoretical framework, point to near-term headwinds for some emerging market currencies,” he said.

Mr Clarke said that while there are some positives when it comes to macro themes and geopolitical risks in the emerging world (Asian commodity importers being one example), in general the ‘why’ influence is predominately negative for emerging market currencies.

“In fact, the ‘where’ and ‘why’ parts of our investment process have largely been working in opposition since mid-2015,” he said. “This compels us to be cautious about the opportunities identified by our fundamental valuation analysis. However, commodities have recently stabilised under official guidance, and market participants appear to be less punishing towards the externally vulnerable currencies. Hence we are partly rebuilding several emergency currency exposures. China’s flip from last year’s small yuan devaluation to supportive intervention last quarter also reduces the influence of another macro-thematic headwind.”

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Alex François

The William Blair Emerging Markets Leaders Fund (the Fund) has been rated by investment services research house, Lonsec.

In its Fund Review, Lonsec said the Fund’s strengths include, “the Manager’s history of managing emerging markets portfolios”, “a quality portfolio management team, motivated analyst research pool, disciplined stable investment process” and the Manager’s “track record of maintaining a conservative approach to capacity management”.

William Blair Head of Australian and New Zealand Institutional Distribution, Alex Francois said the rating reinforces the benefits of William Blair’s highly active, unconstrained quality growth approach to portfolio management of emerging markets equities.

“We value the ratings process undertaken by Lonsec and believe the Fund will add significant value within a diversified portfolio,” he said. “We believe emerging markets continue to be an area that in the medium to long term will feature in most people’s investment horizon and the Fund offers Australian investors access to those attractive developing markets that continue to benefit from exposure to global themes, like favourable demographic growth.”

Lonsec described William Blair as “a fundamental, active investment firm applying an investment philosophy that seeks to invest in quality growth companies” and added that, “this focus typically results in the Fund exhibiting heightened growth style characteristic relative to the benchmark”. Lonsec also noted that “the fund is a ‘long’ only emerging markets/regional equities product and, as such, will generally sit within the growth component of a balanced portfolio”.

Lonsec believes the Fund suitable for high-risk profile investors with a 5+ year investment time horizon.

Mr Francois said, “We believe that Lonsec’s analysis of the Fund provides industry professionals with the information required to make an informed decision on the inclusion of the William Blair Emerging Markets Leaders Fund to enhance a diversified equity portfolio.”

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Romina Graiver

Recently in Australia to promote William Blair’s Unit Trusts, launched last year, William Blair’s International and Global Equity Specialist, Romina Graiver, said the Chicago-based asset manager’s views of the China market have significantly changed over the past six months, following new leadership focused on avoiding a hard landing of the economy while switching from an infrastructure-oriented to a consumer-oriented model.

“The Government is taking the initiative to transform the previous pattern of economic development in China, which proved successful in the past, but poses risks for the future. They are implementing significant structural reforms in many areas among which is the key financial sector reform. We have seen the opening of the stock market with the launch of the Shanghai-Hong Kong Market Connect, which allows mainland Chinese investors to access the offshore market and foreigners to invest in the domestic Chinese market. A program that allows banks to swap short-term loans with long-term bonds and municipal bonds has been put in place, and that is going to be expanded,” Ms Graiver said.

It’s an approach that seems to be working – China has been the strongest performing market over the past year, with index returns ranging from 50-125%, far outpacing global equity market returns.

Ms Graiver said a two level strategy is in play. “One is turn off infrastructure, two is turn on consumer. We look for high-quality growth companies that can demonstrate high returns and quality products and services and some are in areas described by China as an area of priority.”

‘Made in China 2025’, she said, now includes IT, environment protection, aerospace and aviation, railroads etc.

“It’s about urbanization, communication and improvement in areas that matter. We look at China from a real bottom-up, stock picking market perspective and we find some interesting opportunities there. China is really leading the way in many areas. If you look at many IT companies/internet companies, you can see similar companies in the US using the model that China made in gaming/social media.”

Ms Graiver said China is moving away from the negative connotations associated with being a cheap producer and is moving up in the value added chain, producing much higher quality products.

“We don’t believe that this will stop any time soon,” Ms Graiver said. “This has to materialize in better companies turning out better products and profits. There is a lot of liquidity there to continue to support the Chinese market expansion. China is the big engine for Asia and the rest of the world, so clearly it being in good shape is good for everyone.”

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Romina Graiver

Recently in Australia to promote William Blair’s Unit Trusts, launched earlier this year, William Blair’s International and Global Equity Specialist, Romina Graiver, said the Chicago-based asset manager uncovers many quality opportunities in emerging markets.

“Investors know about the growth story in emerging markets however we believe in many cases they underestimate the quality aspect of it,” she said. “Sustained high level of economic growth has enabled many emerging markets companies to generate consistently higher returns on assets and capital. We also acknowledge that some areas and macro events have provided a tailwind effect for companies to do better as they benefit from an economy that is growing, rather than contracting, which is where we are seeing that there is a bit of de-coupling.”

Finding high quality growth companies in emerging markets is Chicago-based global asset manager William Blair’s driving theme with approximately a third of their 2500 global quality growth investment universe made up of emerging markets companies.

Ms Graiver said some emerging markets companies within William Blair’s Emerging Leaders strategy also belong to the Global Leaders strategy, which demonstrates that these companies can be among the highest quality on a global scope.  “We use the same process, research and analysis for companies in both portfolios but it is tougher for an emerging market company to get into the Global Leaders strategy because of the broader opportunity set,” Ms Gravier said.

“William Blair looks at the top down views, but at the end of the day, we use bottom up fundamental analysis to find quality growth companies with strong governance. We are not going to play a theme if we are not finding the best quality growth companies in that theme,” Ms Graiver said. “In emerging markets we like countries where we see tailwinds for companies to do even better, for example countries where we see opportunities for reform, rather than countries where the macro trends are a headwind for companies.”

“We like India and Indonesia for instance,” Ms Graiver said.  “In India we increased our exposure well before the elections. India is a market where we often find very high quality companies with very strong management – like IT services and pharmaceuticals. Early this year we increased our exposure to more cyclical names, which are expected to benefit from an improvement in the domestic economy. We also like auto-related companies in India, some of which are benefiting from car demand recovery and improved sentiment.”

Ms Graiver said William Blair saw a real growth opportunity for India with the likelihood of the Modi pro-growth government coming to power, which would provide a better framework for these quality companies.

“We looked at Modi’s previous work as a provincial Governor and how this boosted GDP growth and in his work fighting corruption and bureaucracy along with feedback from companies who had different activities in different regions.  The standard of living in Modi’s Gunjarat province was much higher than other regions of India.”

William Blair has increased exposure slightly in Indonesia, Ms Graiver said, where there are some high quality companies and again there is likelihood for reform with a new government. William Blair has also increased to an overweight position in Mexico due to the clear intention for structural change and also the benefits of proximity to the United States as a trading partner.

Ms Graiver said in contrast to the above, Brazil, which is struggling with slow growth, high inflation and a current account deficit, does not look compelling from a top down perspective. There are, however, some very attractive  companies with strong operating performance and growth prospects. “Despite the weak macro environment, some companies are benefiting from secular growth drivers, such as evolving consumption patterns driven by social demographic changes; others are supported by government policies  like in  the education space” Ms Graiver said.

In China, William Blair is underweight, however, less than before. Ms Graiver said William Blair sees some optimism regarding recent data reports, helped by mini or targeted stimulus measures however, they see a long term deceleration of economic activity. “China is going through a big deleveraging process which will reduce GDP growth,” she said.  “The government seems committed to reform and is moving forward in many areas (financial reform, SOEs, etc) but at the same time they have to manage the gradual transition from high-leveraged and investment driven economy to a more consumer driven economy. There may be some pain along the way however there are areas in China that are seeing favourable growth trends and the market is attractive from a valuation perspective compared to other markets and compared to its own history.”

In the end it is William Blair’s ability to select quality stories in their universe of emerging markets which benefit from the tailwind of prospects and growth at a macro level which is an additional driver of performance.

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Alex François

Australian investors will have greater global investment choices following the launch yesterday of William Blair’s first unit trusts in Australia.

The Chicago-based asset manager has opened its Global Leaders Equity Fund, Emerging Market Leaders Equity Fund and its Dynamic Diversified Allocation Fund to Australian institutional and wholesale investors (via platforms).

William Blair’s Global Head of Distribution, Dan Charles, said the launch of the trusts is indicative of William Blair’s desire to provide the Australian market with an opportunity to tap into the expertise of portfolio managers around the globe in the areas of global equities, emerging markets and dynamic asset allocation strategies.

“William Blair’s quality growth, bottom-up investment style looks to long-term consistent quality growth in the asset classes of global equities and emerging markets, with a style that is competitive with all of the biggest players in the Australian market,” Mr Charles said. “We look for certain characteristics – the fundamental aspects of an organisation or a company that will give long term consistent quality growth. We only use benchmarks as a reference guide, never as a guiding principle for how we invest.”

Head of Australia and New Zealand Institutional Distribution, Alex François, said William Blair’s unit trusts offer Australian investors access to broader global equity market leaders and to industry sectors and themes that may not be accessible via the Australian Securities Exchange (ASX) – something that, arguably, Australians need even more than United States and European investors, because of the comparatively small size of the Australian market.

“Investors in the developed world, which is now in recovery, need greater exposure to global geopolitical themes,” Mr François said. “We look at the macroeconomic viewpoints of these themes and implement them within a portfolio that provides a total return. Emerging markets also continue to be an area that in the medium to long term will have to feature in most people’s investment horizon and will be able to via our trusts.”

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US tapering presents investment opportunities: William Blair

Fears of stability across the globe around tapering are creating significant investment opportunities in countries like India, Thailand, the Ukraine, Venezuela and Argentina, according to William Blair’s Head of Dynamic Allocation Strategies (DAS), Brian Singer.

On a visit to Australia to promote William Blair’s DAS to institutional investors last week, Mr Singer said geopolitical events do not tend to change the valuation of assets or the value of currencies.  “Risks are definitely out there, but the developments are creating opportunities,” he said. “These events significantly motivate prices away from or towards fundamental value.”

Mr Singer said William Blair’s DAS team assesses each individual geopolitical situation, to decide whether the opportunity is adequately compensating for the risk that is introduced. “What we are doing is taking some of the risk away from just being exposed to the market and adding risk that is uncorrelated to the currency,” he said. “India became our largest position when Raghuram Rajan became the Governor of the Reserve Bank of India in August 2013.”

India is still the William Blair DAS team’s largest position due to a significant interest rate differential and because the currency is cheap relative to its fundamental value. “It looks to be a great opportunity going forward, and a great diversifier for portfolios.”

Mr Singer said the first port of call for the William Blair DAS team in deciding to invest in equity markets, bond markets and currencies all over the world, is to determine fundamental value. “We look for prices that revert back to fundamental value over time,” he said. “Within the current geopolitically unstable environment, there are a lot of strategic negotiations and it is important to understand those negotiations and the behaviours of the players as that pushes prices around.“

On currencies, Mr Singer’s said the William Blair DAS team estimates the value of the Australian dollar at about $0.65-$0.70 to the US dollar. “So it’s a long way away from fundamental value,” he said. “We are short and we are short most of the commodity currencies for a number of reasons. First of all because we believe commodity super-cycles have led investors to push prices up above fundamental values and secondly because we see the opportunity for those prices to revert back to fundamental value as commodity prices come down.”

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Brian Singer

The Eurozone, which has been the very centre of political instability, is where growth is most likely to emerge in 2014 and, in terms of currency, the Indian Rupee will be the place to be, according to Brian Singer, Head of Dynamic Allocation Strategies at William Blair.

On a recent visit to Australia, Mr Singer said that the Eurozone is becoming increasingly more stable, which is conducive to growth. “There is more stability there now and there is likely to be more stability there in the future than the market appreciates and that’s all supportive of growth,” he said.

Mr Singer said William Blair’s Dynamic Allocation strategies are currently overweight Italy and Spain and has other exposures across the Eurozone, including the Dutch and German equity markets and very limited exposure in France. “Those are the primary exposures,” he said.  “The implementation comes through a combination of futures and ETFs.”

Still in Europe, on a sector basis, Mr Singer has a little bit of a leaning towards the financials and does not incur the exchange rate exposure. “We are actually short the Euro and Swiss franc as well,” he said. “We are doing that as a matter of saying we do want equities exposure but we don’t want exposure to the currency. Not only do we not want exposure to the currency, we do want to be short the currency.”

However, speaking of currencies, it’s a different story in Asia, where William Blair has recently taken a long position in the Indian rupee.

“The largest exposure we have in Asia is a long position in the Indian rupee,” Mr Singer said. “It’s not everybody’s cup of tea but it is cheaper now than since about 2007. The discrepancy between the Indian rupee and what we would say is its fundamental value increased to such a degree that we were more comfortable taking a position.”

In addition, Mr Singer said the interest rate differential in India began to move higher, creating a greater incentive to step into the currency. “When you are getting that type of carry in owning the Indian rupee on a forward basis and picking up that interest rate differential, it’s compelling,” he said.

Mr Singer discounted the panic that has occurred in the Indian rupee over the last couple of months as the market’s attempt to perceive what’s going on from the perspective of the experience of the 1998 Asian currency crisis.

“We simply don’t believe the environment is the same as that environment. We aren’t dealing with rates that are coming off, we aren’t dealing with exploding current account issues and challenged reserve situations,” he said. “The Indian current account deficit has been in place for years and the market has become aware of it this year – good for them, it provides us with an opportunity to focus on that and creates the opportunity.”

William Blair is currently short the Australian dollar.

William Blair launched an Australian and New Zealand presence, headed up by Australian executive, Alex Francois a year ago.

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