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Manager mines potential in Europe, India

Most of his picks in developed world, but still 'bullish' on emerging markets


When it comes to recent international opportunities in small- and mid-sized growth companies, continental Europe has been the best place to look in the developed world and India the best of the emerging markets, according to fund manager Jeff Urbina.

Mr. Urbina, a principal at Chicago-based William Blair & Co., and his team took over management of the underperforming GBC International Growth Fund in August, 2001. The $57-million fund offered by GBC Asset Investment Management Inc. is up 9.85 per cent so far in 2005 and recorded a 16.62-per-cent advance in the 12 months ended June 30. The fund's three-year annualized return is 9.19 per cent, the five-year a 3.3-per-cent loss and the 15-year a 2.82-per-cent gain.

"What we are looking for are the best growth companies wherever they may be," Mr. Urbina said. At the moment, the most attractive possibilities in the high-quality small- and mid-cap growth companies that William Blair focuses on are to be found in continental Europe. "In the last six to nine months -- from a company perspective, from a bottom-up perspective -- we actually have seen better investment ideas and more interesting ideas in continental Europe, which has surprised us," he said, adding the same doesn't apply to Britain.

About 80 to 85 per cent of the fund is invested in stocks from developed nations and the remainder is in emerging markets. "We are still very bullish about emerging markets over the long run," Mr. Urbina said. He particularly likes India.

India may not be quite as good a macro-economic story as China, but the companies in India "are much, much better than you would find not only in China, but most emerging markets," he said.

Mr. Urbina said he is "fairly comfortable" with global growth and the stock markets' performance and valuations. The biggest risk to the scenario is China, he said.

"How much is China going to slow down? Is it going to slow down too quickly? Is it going to heat up and are commodities going to go back up?" he said, noting that the signs, so far, are hopeful.

"So far, it appears that the Chinese government is going to be able to manage . . . to slow its economy down to a reasonable level without causing a recession," he added.

China made the news last week because of its decision to loosen the yuan's peg to the U.S. dollar. The currency revaluation was, in Mr. Urbina's opinion, more political than economic. By tying the yuan to the dollar, China in essence linked its monetary policy to that of the United States.

"The monetary policy in the U.S. has been very accommodative, as it needed to be, but that is not what you need in China," he said, adding that the loosening of the peg gives the Chinese government more flexibility with its own monetary policy.

In choosing the 80 to 100 stocks that typically make up the portfolio, Mr. Urbina first looks at a company's management, since good management will deliver the financial results he is expecting, he said.

He then checks to see if the company has a record of consistent and sustainable growth in volume, revenue and profits and that the company can continue to grow over an extended period of time.

The fund's current holdings include Orpea SA, a French nursing home owner-operator. "They are the best nursing home operator in France, in my opinion," Mr. Urbina said.

"You have got demographics going for you: an aging population, all those things. You also have the French government, which understands that they don't have the money to own and operate all the nursing homes as public facilities," he said. Orpea is expanding its facilities and making acquisitions from smaller operators. "It is a consistent growth company," he said.

Capio AB (CAP SS-Stockholm) is another European health care provider the fund favours. The company, which owns and operates hospitals in Sweden, has recently branched out and started to buy and operate hospitals in France and Spain and, in the process, has become a pan-European company, Mr. Urbina said.

"Again, the thing we like about European health care at this point is not only demographics, but also the governments becoming more liberal and supporting private participation in the health-care sector," he said. As with the other companies in the portfolio, Capio has "excellent management."

Goodpack Ltd. is a micro-cap Singapore-based company in the logistics business. Goodpack developed a collapsible crate to ship raw rubber initially but the use of these intermediate bulk containers for packing and transporting cargo has been expanded to include edible oils and tomato paste, among other items.

"They have a very protected position," he said, adding that Goodpack's growth in revenue and earnings is about 20 per cent a year.


At the moment, the most attractive possibilities in the high-quality small- and mid-cap growth companies that Jeff Urbina focuses on are to be found in continental Europe. The lead manager of the GBC International Growth Fund favours India among emerging markets.

GBC International Growth Fund

CategoryInternational equity
Lead managerJeff Urbina
Load statusOpen ended
Total assets$57.1-million
Management expense ratio1.97%
Globefund rating (out of 5)*****

Returns to June 30, 2005

1-year simple rate of return16.62%
3-year compound annual 9.19
5-year compound annual-3.30

Top 14 holdings as of June 30, 2005

1.Infosys Technologies2.2%
2.Stada Arzneimittel1.9
3.Aeon Mall1.7
4.Aeon Credit Service1.6
7.April 1.5
8.Capita Group1.4
9.Bijou Brigitte1.4
12.Techtronic Industries1.4
13.Pirelli and Co. Real Estate1.4
14.Nokian Renkaat1.4


© 2007 The Globe and Mail. All rights reserved.

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