This international-stock specialist shines by concentrating on quality.
Harding Loevner has stuck with its core strengths and principles for more than a quarter century while many other fund shops have overextended themselves. Indeed, the firm has only opened five funds since it was founded by a pair of overseas investing experts in 1989. All five of the funds are international-stock offerings. And the funds were launched in a very deliberate and sensible manner. For example, Harding Loevner Frontier Emerging Markets HLFMX, which is the youngest of the quintet, did not open until 2008, which was a decade after Harding Loevner Emerging Markets HLEMX opened and several years after the older fund began to find a significant number of attractive stocks in the younger fund's area of interest.
Each of the funds follows the same quality-driven strategy, and that approach is both attractive and distinctive. Specifically, the firm's managers focus on healthy growers with clear competitive advantages as well as several other positive attributes. The managers pay ample attention to valuations and risk controls and move at a measured pace, but they are also comfortable loading up on sectors and countries that are packed with compelling investments. The end results are portfolios that have appealing mixes of more-conservative traits (such as high-quality metrics and moderate price multiples) and more-aggressive characteristics (such as notable sector and country overweightings). As a result, all of the funds provide significant downside protection without sacrificing too much upside potential.
Meanwhile, Harding Loevner has built a superior investment team by retaining a healthy majority of the seasoned professionals that joined the firm in its early years and by hiring a good number of individuals with strong credentials in the subsequent years. Chief investment officer Simon Hallett came on board in 1991, served as the manager of Harding Loevner International Equity HLMIX and as a comanager of Harding Loevner Emerging Markets for extended periods, and has more than 35 years of relevant experience overall. Lead managers Peter Baughan, Rusty Johnson, Ferrill Roll, and Alec Walsh--who joined the firm in the mid-1990s and who also serve as sector or regional analysts--have three decades or more of investment experience each. And more-recent hires include comanagers Richard Schmidt and Bryan Lloyd (who had served as portfolio managers before they joined the firm and who have spent more than 25 years in the investment field) as well as other individuals with a wide range of investment experience. All told, there are 30 investment professionals at the firm.
The merits of the family discipline and the mettle of the investment team are evident in the performance of the funds. Harding Loevner International Equity, Harding Loevner Emerging Markets, and Harding Loevner Global Equity HLMGX, which opened in the mid-1990s, have held up relatively well in most major sell-offs because of their quality bias and other moderate traits as well as their managers' execution. While the three funds have lagged in certain more exuberant surges, they have earned good gains in several other rallies, thanks to the strength of their managers' stock selection. And Harding Loevner International Equity, Harding Loevner Emerging Markets, and Harding Loevner Global Equity have earned superior 10-year, 15-year, and since-inception total returns and risk-adjusted returns. What's more, Harding Loevner Foreign Small Companies HLMSX has also delivered good total and risk-adjusted results since it was launched in 2007, and Harding Loevner Frontier Emerging Markets has done the same since it opened in 2008.
Harding Loevner, like nearly all fund shops, has areas where it could improve. Its fees could be lower, for example, particularly on its two younger funds and its retail share classes. But investors who are seeking international-stock funds for the long run have ample grounds to check out its lineup.