DWS Investments

International Equities Manager Profile

PRODUCT

DWS Global Equity Thematic Fund (Unhedged)

ORGANISATION

Founded in 1956, DWS Investments is the global retail investment management business line of Deutsche Bank AG, a German based global financial institution. DWS Investments is the largest mutual fund company in Germany. Deutsche Bank Asset Management is issuer and Responsible Entity of the fund and is one of the world’s largest investment management organisations with operations in over 60 countries.

Ironbark Asset Management was founded in May 2009 and is an independent provider of asset management solutions. They are responsible for the distribution of over $1.5 billion of assets and serves as the retail distributor for the fund.

Global Thematic Partners LLC (GTP) has been appointed as investment manager for the Fund. GTP is an asset management firm based in New York which was established in 2010 by the former Deutsche Asset Management Americas Inc employees who were previously responsible for the management of the fund. The investment personnel responsible for the management of the fund remained unchanged. GTP is registered as an investment adviser with the US Securities Exchange Commission and manages approximately $12 billion of assets.

FUNDS UNDER MANAGEMENT

Organisation (GTP): $12 billion as at 30 June 2011

Fund: $673.2 million as at 30 June 2011

 INVESTMENT PROCESS

Investment Philosophy

The Manager’s thematic investment philosophy is based on the belief that there is one global economy and the best investment ideas know no national boundaries. The Manager believes that as the relevance of national boundaries to corporate strategy, activity and profitability diminishes, it makes sense to structure an investment portfolio that emphasises global themes and relationships as opposed to geographic regions.

This philosophy translates into a thematic approach that identifies early on the major secular, cyclical and structural influences on the world’s economies and stock markets. These social, economic, industrial or demographic themes determine the strategic direction of the Fund.

Investment Strategy

The investment style is a research-driven, top-down / bottom-up approach where the top-down aspect is thematic rather than geographic. The focus of the stock selection process is the identification of companies that have strong fundamentals, good management, are positioned to benefit from one or more themes and are reasonably valued. The country allocation is a residual of the thematic approach. The Fund generally does not undertake currency hedging.

The Fund invests in around 80 to 140 global listed securities, and will from time to time also have some exposure to cash investments. Investment in emerging markets (which means any market outside the MSCI World Index) is allowed but will generally not exceed 30% of the Fund.

The Fund may have exposure to derivatives for investment and currency management purposes. In particular derivatives may be used by the Manager for hedging to protect an asset in the Fund against market value fluctuations; to reduce volatility in the Fund; as a substitute for a physical security; or when adjusting asset exposures within the investment parameters of the Fund.

Investment Process

The Fund’s investment process can be summarised as follows:

Theme generation

The Manager begins with the collection and analysis of data from multiple sources, including research analysts, trade journals, broker research and industry experts. From this analysis the Manager identifies key data points, which in combination suggest a long-term trend is in progress. Once a theme is satisfactorily supported by trends, the Manager formally defines it.

Thematic stock screening, modelling and valuation

The Manager then creates an initial cluster of companies for each theme. The cluster will not only include securities that fall within our screens but also any indirect beneficiaries. These beneficiaries are identified by grouping the clusters into supply chains in both directions and scanning for stocks that share characteristics of the thematic analysis. Given the global nature of trade, this analysis frequently crosses regional and sectoral boundaries, which is consistent with the Fund’s investment philosophy.

Valuation is the core of the Manager’s stock selection process. The Manager seeks to purchase securities that are undervalued and sell securities that are fairly priced or overvalued. A component of the analysis utilises cash flow return on investment (CFROI), a measure of the amount of cash a company generates relative to the capital in its business. The aim is to exploit the difference between the current price of a stock and its intrinsic value, determined by assessing the issuer’s ability to generate and grow future cash flows, i.e. its underlying earnings power. The Manager also performs fundamental analysis tailored to each theme. Components of this analysis may include financial statement analysis, industry and cost-curve analysis, liquidity, margin trends and non-financial metrics such as number of patent applications, competition and customer base as well as corporate governance.

Portfolio construction and risk management

The Manager aims to efficiently allocate capital and maximise expected returns while limiting risk. Risk aversion is a guiding factor. Every unit of risk must be compensated with significantly more units of upside potential.

PERFORMANCE to 30 June 2011 (net of fees) 

 ASSESSMENT

The Manager has long standing experience in the industry and generally have more than 5 years working together. The thematic top-down / bottom-up approach is supported by an investment process that is well developed and incorporates sound economic and research fundamentals. The Fund has marginally outperformed the benchmark over the three year period as consistent with its objective, with stronger performances seen over the suggested investment periods of five to seven years. Fees are competitive relative to peers.