Investment philosophy and process

Distinctive investment philosophy

Producing positive long-term investment returns calls for a distinctive investment philosophy, along with a robust and repeatable investment process. Our approach is based on our Focus on Change philosophy, and we apply it to help us identify the key factors driving the market price of an investment.

Understanding the dynamics behind these drivers is what lets us focus on the factors that will cause the stock market to change direction and ultimately produce a revised price. Essentially, we aim to capture anomalies and inefficiencies between consensus and non-consensus analyses of companies, identifying changes that the wider market has yet to notice. We have found that the best opportunities come in the investments where we not only have the deepest insights but also the greatest conviction that market expectations are going to change.

Robust investment process

Delivering investment performance depends on our ability to generate ideas and insights. Our investment process takes a bottom-up approach, seeking to uncover those stocks with real potential. To achieve this, we place meticulous research at the heart of our approach. Company meetings are an essential part of this process – in fact they are the source of the vast majority of our non-consensus investment insights. Our size and reputation ensure we have first-rate access to firms, through both structured meetings and regular conversations with key decision-makers.

Stock selection and recommendations

Every investment idea must be justified by our five questions, which underpin the common investment language that we use across the company. Each stock is rated by the analysts as ‘buy’, ‘hold’ or ‘sell’. Once an analyst has researched a stock, it is then subject to rigorous peer review, where ‘buy’ ideas are scrutinised and assessed for strength of conviction, materiality and timeframe. The end result of these deliberations is a more rounded view of each stock.

Portfolio construction

Our portfolios are built from this bottom-up perspective and reflect our conviction in each stock. Every holding must stand on its own merit and our buy/sell disciplines, driven by our Focus on Change philosophy, mean we continually monitor our portfolios to ensure they are meeting their objectives within the defined risk parameters. We have a dedicated risk management team, and our fund managers also play an active role in managing risk within clients’ funds.