Standard Life Investments

How we invest

We base our investment approach on our Focus on Change philosophy which seeks to identify the most important factors that drive the market price of an investment as well as the dynamics behind them. We also analyse whether these key drivers are already priced in to the investment. We then focus on what’s changing and whether these changes will lead to revised market expectations and therefore a different price.

To maximise market opportunities, our robust and repeatable investment process is deeply integrated across our business. Our fixed income, strategy, equity and multi-asset teams regularly share information and discuss market developments.

Our macro fixed income process covers both government and corporate bonds.

Our government bond specialists have a close working relationship with our strategy and other macro experts within our multi-asset and money market teams. While within corporate bonds, understanding the companies whose bonds we buy is central to our process. Our significant presence in equity markets provides access to the highest levels of company management through our close working relationship with our equity teams. Close links with our corporate governance and responsible investment teams helps us understand the motivations of the board of each company. Poor corporate governance is historically a sign of potential problems ahead for an issuer.

By combining these shared macro and corporate insights and tapping into the vast resources of Standard Life Investments, we are able to build up a deep and rich picture of the global macroeconomic landscape.

Our analysts assess the credit quality of countries and companies – that is their ability to repay their debt obligations. Countries and companies are rated on a scale where AAA is deemed high quality and low-risk; while those given a C or D rating are considered low quality and higher risk. One of the key tools we have developed to monitor credit quality is our Credit Matrix. In practice, the Credit Matrix has been helpful in the early identification of firms that have subsequently experienced significant financial difficulties.

The final stage of our process is deciding which holdings to choose. This decision is based on broad economic trends as well as the fund managers’ fundamental analysis of individual bonds and the companies and governments that issue them. In all cases, we seek to build well-diversified portfolios that will benefit from our investment insight.