Our international equity investment philosophy is rooted in a fundamental investment approach focused on owning larger, high-quality, growth-oriented companies. We believe, over the long-term, that 1) macroeconomic performance drives equity prices at the country level; and 2) higher quality companies will outperform the broader market. The international equity portfolios are diversified across country, sector and security in an effort to manage risk. Our long-term investment horizon typically results in lower portfolio turnover.
The investment process blends a top-down approach to country and sector allocations with fundamental, bottom-up security selection. It begins with a macroeconomic review of the principal economies in the investment universe. On an ongoing basis, we evaluate long-term trends across three primary sets of data: Fiscal; Monetary; and Valuation. Our macro analysis shapes our global economic view, which in turn guides our portfolio country and sector allocations.
We construct portfolios with quality businesses that have sound fundamentals, reasonable valuations and below-average risk. Fundamentals are measured using both quantitative and qualitative analysis. We favor companies with superior competitive positions that are capable of generating strong free cash flow.