Our investment philosophy for management of equity portfolios:
Bottom-up stock selection, combined with top-down risk management and control
- Companies with winning business models can sustain superior earnings growth
- Earnings growth, whether high or low, is often undervalued
- Fundamental, primary research can identify these companies
- Top down asset allocation to control risk
Our disciplined investment decision process is based on a team-approach and is structured as follows:
|1.||Growth and Quality|
Stock ideas are generated at the market and sector level from the stock universe. We look for stocks which show good potential for both secular and internal earnings growth. Through our extensive research and local market awareness, we aim to avoid predictable threats to a business, whether technological, regulatory, or via competition.
When looking at the quality of a company we look at a balance between growth prospects, quality of the company and valuation.
Thus critical qualitative factors include:
Upon identifying growth and quality, we assess whether the company is available at reasonable value. We use, among other measures, P/E relative to market / sector, book value and price to cash flow etc. to measure a company’s value.
The same commitment to research, philosophy and process is pervasive across all sectors, countries and regions. Nevertheless analysts make use of various tools when analyzing stocks in different sectors including:
We employ a common voting system to assess overall opinions and determine stock weightings
The authority for “buys” is driven by a disciplined team process based around a stock rating system. Stocks are chosen for their growth prospects and therefore analysts naturally monitor stocks for their long-term suitability for equity portfolios. 12-18 months would be considered the minimum holding period although in general our investment philosophy is geared toward a long-term three year period.
For fixed income portfolios, accurate identification of economic and interest rate cycles is critical. This will broadly determine the duration and credit risk of securities that we would consider investing in.
Portfolio construction is predominately judgmentally-driven focusing on using the best investment ideas from the research process. The portfolio managers look to add value by taking active positions versus the benchmark where our bottom-up stock selection process identifies investment opportunities.
Each portfolio is constructed through a thorough assessment of every client’s requirements. As a fund manager, our primary objective is to achieve the optimum total returns on the client’s assets under our management, commensurate with the degree of risk specified as acceptable by the client. We believe that a full knowledge of a client’s performance objectives and risk tolerance is indispensable to successful portfolio management.
|5.||Risk Management & Controls|
The portfolio would be monitored daily with regard to the portfolio’s position in relation to the benchmark, sector exposure, investment restrictions and other client guidelines. The CIO would review the portfolio on a regular basis to ensure consistency with the recommendations, process and client guidelines.
Investment meetings are held between the clients and us at regular intervals to ensure that the client is fully apprised of their portfolio’s progress and they are aware of our intended investment strategy at that particular time will be. It is a useful forum to measure the fund manager’s intentions against results, and most importantly, those results against the clients’ own expectations.