- Value outperforms over time, but themes driving markets are cyclical
Undervalued shares have proven to outperform over the long term, providing the rationale for our valuation-based approach. However, markets move in cycles and fund managers applying a specific investment style tend to suffer periods of underperformance. The negative impact of market cycles can be moderated by considering various company attributes that complement value and have also proven to outperform over time, namely the quality of a company, its earnings growth and market sentiment.
- Market inefficiencies can be exploited through extensive research and analysis
Relentless research underpins every investment decision. A disciplined and structured approach to fundamental analysis is essential in identifying and exploiting market inefficiencies – and ultimately extracting alpha. We invest extensively in systems to support our comprehensive research − tracking the long-term history of each share to determine its response under different scenarios. Following robust debate, these insights guide our forecasts and guard against psychological pitfalls.
- Skilful risk management, not avoidance, is critical to long-term success
Volatility creates opportunity. Rather than focusing solely on a share’s upside potential, our approach is to fully understand the downside risks and skilfully exploit these. Understanding the risks also enables us to manage overall portfolio volatility by carefully considering how individual shares behave and interact. We believe that a fund manager skilled in controlling overall portfolio risk generates enhanced risk-adjusted returns for clients.
- Companies that fully embrace ESG create long-term shareholder value
As a long-term investor, we believe that incorporating relevant environmental, social and governance (ESG) factors into our investment and ownership decisions ultimately leads to improved risk-adjusted returns for our clients. Identifying issues that currently or at some point in the future may materially impact the long-term value of a company, gives us insight into a business’ ability to grow sustainably. As shareholders, we regularly engage with companies’ management teams as well as actively exercising our voting rights.
- Continually timing the market correctly is impossible
Our unwavering approach to selecting shares (based on the fundamental value combined with proven, outperforming themes) helps us avoid the lure of trying to time the markets. Attempting to time the market can play havoc with a portfolio’s risk levels or cash levels – both of which ultimately detract from performance.