Renaissance: aerospace, electrification lift international strategy; manager sold some China ADRs on delisting risk

Mike Streetmarter, partner and portfolio manager for Renaissance Investments' international strategy, presented the firm's quarterly report to the Sarasota City Firefighters' Pension Plan Board of Trustees on Sept. 24. He said the international strategy returned about 15.5% through June 30 and that the third quarter had continued the positive trend, with the strategy up roughly 10% in the quarter to date.

Streetmarter described Renaissance as a growth-at-a-reasonable-price (GARP) manager that uses a two-step process: a quantitative 13-factor screen followed by fundamental analysis of the top-ranked names. He said Renaissance manages roughly $3.6 billion in assets overall, with about $400 million in the international strategy.

Performance drivers: Renaissance said industrials — particularly aerospace and defense names such as BAE Systems — and the electrification theme (companies that supply grid and power infrastructure) helped returns. Streetmarter said the firm trimmed or sold positions when valuations became stretched, citing Rolls-Royce as an example: "we ended up selling our position in Rolls Royce, purely based on a valuation," he said.

Geography and sector moves: The presentation listed a roughly 14% position in Japan, a reduced Asia-Pacific weight overall, and an allocation to China that had been reduced then increased as policy and stimulus conditions shifted. Streetmarter said the team sold Chinese ADRs in April that did not have a primary or secondary Hong Kong listing because of concern that U.S. delisting proposals could remove buyers from those issues.

On banks and financials, Renaissance said the team was hurt relative to the benchmark by an underweight to European banks and stock selection within financials; the firm added a position in Piraeus Bank (Greece) after seeing improving macro indicators. The firm described portfolio themes including electrification (cable and grid equipment makers) and continued selective exposure to semiconductor names.

Streetmarter told trustees the strategy uses valuation discipline and the firm's quant process to avoid style drift, and that recent third-quarter strength has narrowed earlier multi-year underperformance. Trustees asked a few clarifying questions about sector and country weights; no immediate action was taken by the board.