Simone Loke's bias in favour of mid-capitalization companies is reflected in the $50-million TD European Growth - I that she manages.
Though multinational giants such as HSBC Holdings PLC and Nestlé SA figure prominently in the mainly large-cap portfolio, there is also significant exposure to smaller, lesser known names.
"Maybe it's my aptitude, experience, or how I tend to tilt," says Loke, "but I am actually pretty good at finding niches in the mid-cap areas, which a lot of people miss or don't even know about." There's a lot of growth, more so in the mid-cap areas, which is misunderstood or mispriced, she adds.
A vice-president and director, investment management, at TD Asset Management Inc., Loke joined the fund as co-manager in April 2006 and assumed the lead role in January 2008.
Loke employs a growth-at-a-reasonable-price discipline. Since earnings can be volatile, she spends much of her time looking at cash-flow multiples. Cash flow "tells us how much returns can come back to us, " says Loke, "both in terms of dividends and in share buyback. " Return on equity is another key consideration.
TD European Growth currently holds about 70 positions. From a sector perspective, the fund is very close to the market weight in financials, with currently a 23% weighting compared to the benchmark MSCI Europe's 24%. Though Loke's country and sector exposure is driven mainly by her company-specific selection process, she has made a point of minimizing her exposure to Portugal, Ireland, Greece and Spain because of the onerous sovereign-debt loads in these countries.
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Loke's research process includes travelling twice a year, often off the beaten track. Industrial companies, which, tend to be located outside of the city, are among her favourite potential picks. "Europe has a much deeper history in industrial-based companies," says Loke, for whom visits to factories and in-person meetings with management and employees provide valuable insights.
During her time as manager, Loke has broadened TD European Growth's exposure to different market-capitalization segments. Small-cap companies, with less than $1 billion in market cap, currently represent approximately 20% of the overall portfolio.
Loke's portfolio turnover in TD European Growth tends to be moderate. She describes it as being "single digit per quarter." While price targets are set for companies with a time horizon of 12 to 18 months, many of the long-standing quality names, such as the German health-care and chemical conglomerate Bayer AG, are long-term holdings.
Born and raised in Hong Kong, Loke graduated with an honours BA from the University of Kent at Canterbury in 1985, specializing in accounting. Upon graduation, she returned to Hong Kong for two years, then moved to New York to earn her MBA from New York University in 1989, specializing in finance and security analysis. She returned to Hong Kong in 1990 and joined HSBC Asset Management as an analyst for Europe, then became a back-up manager within two years.
After the 1989 Tiananmen Square massacre in Beijing and the ensuing political situation, Loke's family decided to immigrate to Canada. In 1992, Loke joined TAL Investment Counsel in Toronto in 1995, and also earned her CFA designation that year. In her current role at TDAM, which includes managing some private-client accounts, she is responsible for approximately $100 million in assets under management.
Most of TD European Growth's track record predates Loke's tenure. When TD European Growth was launched in June 1996, Credit Suisse First Boston was the portfolio manager. The international team of TD Asset Management in the U.K. took over in June 2002. Then, in November 2005, the team was moved to Toronto and went through a transition period after the previous portfolio manager didn't move to Canada.
Loke is one of two portfolio managers responsible for TD European Growth. The other is Carrie Yakimovich. Along with the analysts, Loke researches industrials and materials producers in other regions of the world, including Asia and North America. "There's a lot of cross-breeding and help across the firm's U.S. and Canadian teams," she explains.
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