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The International (EAFE) team
is responsible for all country, sector and stock decisions. The team presents their
country/sector notes as well as views on market valuations at monthly meetings. They
evaluate long-term factors such as forecasted country/sector growth and structural
domestic demand for equities, as well as medium-term variables that include likely changes
in short rates and fiscal policy. These can include liquidity conditions, excess money
growth, exchange rate implications, upside and downside profit surprises, valuations
relative to potential and the effect of technical (supply/demand) factors. Country ratings
and sector allocations are determined at this meeting.
Individual stocks are researched on a fundamental basis to identify those that meet the
country and sector objectives. New Star conducts research using a combination of company
visits, broker research, analyst meetings and financial databases. Stock candidates are
further analyzed using Economic Value Added (EVA) methodology to understand the factors
driving company profitability, highlight companies that should be avoided and make
cross-border comparisons. Managers prepare recommendation notes that define the stock's
role in the country/sector strategy and its appreciation potential relative to its peer
group. Portfolio managers are responsible for stock selection within their region of
expertise based on a combination of country, sector and stock-specific considerations.
New Star actively manages currency to reduce risk and add value if a client's mandate
allows. The Currency Team researches and establishes the firm's views on currency and
effectively provides an internal currency overlay service.
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