NYLI PineStone International Equity Cl P FCIHX Fund Analysis

The PineStone International Equity strategy, which includes Canada-domiciled NBI International High Conviction Private Portfolio, NBI International Equity, and US-domiciled MainStay PineStone International Equity, continues to impress through its experienced and aligned team combined with a rigorous bottom-up process. Subadvised by PineStone Asset Management, the strategy earns Above Average People and Process ratings. The firm’s founder and portfolio manager Nadim Rizk and head of research Andrew Chan lead the strategy and have worked together for over 15 years, delivering great results for investors. They are supported by an experienced analyst team that has been well-trained in Rizk’s investment philosophy. Staff turnover has remained remarkably low. The team collaborates extensively, but Rizk is responsible for all final decisions on purchases and sales. While there is no imminent retirement in sight for Rizk, succession planning is worth monitoring. But it’s positive that they’ve introduced a structure that has allowed most of the team to buy an equity stake in the business, further aligning them with investors. The strategy benefits from a clearly defined, rigorous research process with a long-term horizon. The investment team employs a combination of quantitative screening and industry expertise to narrow the strategy’s large universe, emphasizing quality-focused metrics such as low leverage and return on invested capital but also considering growth and valuation criteria. The team then scrutinizes companies’ competitive advantages or strives to identify red flags. It conducts in-depth research on its shortlisted ideas to build its investment thesis, which is debated and challenged by members of the team. The process results in a high-conviction portfolio of 25-35 stocks the team seeks to purchase at a fair or better valuation and hold for the long term. Over the long haul, the strategy’s performance has been driven by stock-picking and the portfolio’s defensive characteristics, which have resulted in excellent risk-adjusted returns. But the portfolio’s concentration in relatively expensive, quality-growth stocks means that it can underperform when growth stocks are out of favor. The strategy can also lag during cyclical recoveries as the manager tends to avoid businesses with highly cyclical attributes or a wide range of potential outcomes. The strategy has had great success over the long haul. Since the Canada-domiciled NBI International High Conviction Private Portfolio Class F-2’s inception in May 2015 through April 2024, the fund gained 9% annualized in Canadian dollar terms, outpacing the MSCI EAFE Index by 4 percentage points.