Morningstar - Q4 2021 - 80

Investors
Rondure New World RNWIX
Morningstar Category
3-Yr Annlzd Return (%)
3-Yr % Rank in Cat
Morningstar Rating
Expense Ratio (%)
Diversified
Emerging Markets
11.62
28
QQQQ
1.10%
Source: Morningstar Direct. Data as of 09/30/2021.
2330:TW. It's been in the fund since 2017,
and Geritz added to the position when the sector
was in a cyclical slump in 2019. While the
stock has soared since, she says, " there are a lot
of new avenues for demand for the semiconductor
space, and it's become perhaps
less cyclical. "
Rondure Overseas ROSIX
Morningstar Category
3-Yr Annlzd Return (%)
3-Yr % Rank in Cat
Morningstar Rating
Expense Ratio (%)
Foreign Large
Growth
9.32
89
QQ
0.85%
Source: Morningstar Direct. Data as of 09/30/2021.
Overseas has positions in ASML ASML:NL and
Melexis MELE:BE. Clayton calls the latter
" an exceptional little company out of Belgium that
specializes in semiconductors for autos-
and emblematic of our small-cap expertise. "
Rondure's qualitative assessment also incorporates
an environmental, social, and
governance framework that evaluates country
risk. (Geritz serves on the global policy reference
group for the United Nations Principles
of Responsible Investment.) Rondure terms this
ESG analysis CGP2
-it encompasses credit,
geography, politics, and people. This country
assessment provides a framework for
evaluating companies.
glue, meaning customers are brand-loyal or
face switching costs; and platform, or mechanism
for controlling a valuable network.
Many of the names that meet these standards are
consumer companies, which are the " heart
and soul " of Rondure, Clayton says. About 50% of
both funds were in the consumer staples
and discretionary sectors combined as of midyear.
" Some of these brands have existed for more
than 100 years, which is a testament to the moat
for those companies. " He points to Heineken
HEIA:NL and LVMH MC:FR as " great global
consumer stories. "
Similar themes are echoed in both portfolios. The
Overseas fund holds German companies
Adidas ADS:DE and Puma PUM:DE in its top 10,
for example, while one of New World's top
holdings is China's Anta Sports Products 02020:HK.
Both funds are also positioned to benefit from
the global chip shortage. New World's top
holding is Taiwan Semiconductor Manufacturing
80
Morningstar Q4 2021
Differences in country focus may help explain
why Rondure Overseas currently earns a
Morningstar Sustainability Rating of 4 globes,
while the New World fund earns 2. Both funds are
evaluated within the same broad large-cap
Morningstar global category, but the emergingmarkets
portfolio shows higher relative ESG
risk. (Both funds earn Morningstar Low Carbon
Designations, however.) Rondure's goal
is ongoing dialogue with company management
and iterative improvement on ESG issues.
" I grew up in Hong Kong, a tiny city-state,
so I have always been outward looking and aware
of global context, " So says. " Having an
understanding of the local situation is important
when it comes to sensitive topics like this. "
After the qualitative evaluation, the team
constructs and monitors portfolios of 80-125
stocks, using a proprietary model to project
five-year profitability and assess relative valuation.
Ongoing due diligence alerts them to
key changes to a thesis. For example, they sold
longtime holding Starbucks SBUX when
the company took on debt to buy back shares.
The portfolio profiles don't align neatly with
standard benchmarks or category averages. The
funds have more in smaller- and mid-cap
names and different country focuses. For example,
New World had less in China than the MSCI
Emerging Markets Index as of midyear, and twice
the stake in India, where companies are
more likely to do well on Rondure's screens.
Liquidity is not as abundant in India as it is in
China, So says, which means companies tend to
have better balance sheets: " When capital
is scarce, you have a pool of management teams
that can run a company profitably. "
The Measure of Success
Geritz says clients should continue to expect
higher tracking error than most firms. The goal is
to outperform over a full market cycle while
keeping risk in check. So far, New World's returns
have been competitive within the diversified
emerging-markets category, while the Overseas
fund has not quite kept pace with the average
foreign large-growth category.
" Don't expect us to knock the ball out of the park
in a raging bull market, " McCulloch Dunne
says. " But we will mitigate downside risk better
than most. It shows up in the numbers. "
Indeed, both funds have Morningstar Risk
ratings of Low relative to their Morningstar
Category peers.
The firm has drawn more than $300 million in
assets under management so far, the bulk of it
directed to the New World fund. " People
trust us to approach emerging markets in a way
that allows them to sleep well at night, "
Geritz says. " And there's the greater good we
want to accomplish as well. "
The young firm has already contributed to
that greater good, So says: " I'll speak for Laura,
as she's very modest. She's already had
success as a change agent in the industry. For
women to be represented and have visibility
in this industry is a success. " K
Laura Lallos is managing editor of Morningstar magazine.
Photography by David Lees.
Morningstar - Q4 2021

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