Asset classes

We have designed a five stage investment process that provides a consistent approach to identifying high-conviction ideas, whilst using resources efficiently. Fund managers have considerable discretion in how they apply this process in portfolios construction, resulting in a diverse range of concentrated, high-alpha investment solutions specifically designed to meet the totality of our clients’ needs.

Our investment ideas are generated from a variety of sources, both top-down and bottom-up. These include macro and thematic trends, the experience of team members, the outcomes of company meetings, quantitative screening and internal and external analysis. Each is considered first on its own merits, with initial high level analysis carried out by the ‘idea discoverer’.

The UK Equities team deploys a screening methodology to refine our investment ideas, including an extensive database comprising twenty years of valuation and operational data, along with qualitative factors, covering all companies in the FTSE All-Share index. This supplements idea generation and is appropriate to a range of investment styles.

This stage of our process draws out the fullest understanding of what is already known about the stock idea, calling on the experiences and opinions of other team members, and ensures that other potentially appropriate opportunities are assessed alongside the original investment idea.

A ‘Sponsoring Fund Manager’ (SFM) formally evaluates the potential of all investment ideas, and subsequently ensures they are developed to a satisfactory conclusion. The SFM agrees the type and degree of analysis required for each idea and allocates appropriate resources to achieve this within an agreed timeframe.

Thorough bottom-up analysis is conducted by portfolio managers in conjunction with a team of sector-specific analysts. Smaller companies are covered by specialists forming a part of the wider UK Equity team. We also meet with company management on an agenda-driven basis, and these meetings provide a critical forum for further company research.

Each stock idea is rigorously assessed for what we consider is already reflected ‘in the price’, and to gauge sentiment towards the stock in terms of the level of optimism or pessimism associated with it. This stage includes an analysis of future cash flows, an evaluation of the company’s position in its life cycle, a view on its historic profitability, an analysis of its products in the context of barriers to entry and finally, an assessment of its management’s capabilities.

Analysts present ideas to the wider team at their daily meetings, where investment ideas can be rigorously debated and relative conviction levels are quantitatively measured through a recommendation-tracking methodology. The objective here is to air opinions rather than to draw firm conclusions, and subsequently individual fund managers are at liberty to determine whether a stock idea is appropriate for their portfolios.