We believe that:
Stocks are usually fairly valued by the market, but mis-valuations can occur in situations of rapid change
We should focus our fundamental bottom-up research on stocks involved in rapid fundamental change, or
facing a rapidly-changing business environment.
Change is constant and therefore a sustainable source of alpha.
Investment Process Overview
Idea Generation and Research
Ideas are generated from situations where we believe rapid change is taking place in companies, whether driven by internal or external factors.
In-depth bottom-up research is focused on companies where, prima facie, the impact of change may not be properly recognised by the market.
Company visits are a key part of the research process: the portfolio managers meet with over 600 companies per annum.
Standard global research template applied to all companies analysed.
We are looking for companies where cash flow outlook is materially different from consensus expectations over a two to three year view
Stocks have a minimum 50% absolute return target on a two-year view
All stock ideas subjected to rigourous, in-depth peer review before selection
Fund manager remuneration is mathematically linked to performance of each individual stock selection proposed by them.
Portfolio Construction and Risk Control
“Benchmark agnostic” approach - holdings not influenced by benchmark weightings
Approximately 35 stocks held
35-50% turnover per annum
Usually 3-5% per stock. Maximum 10%
Maximum 30% per country or sector, except US
Maximum 30% combined in small caps/emerging market stocks