Consistent Philosophy
Proven and profitable businesses undergoing multiyear catalysts can provide significant opportunities for outperformance
Style agnostic
We apply our philosophy across the valuation spectrum and expect to deliver alpha as some companies transition from value to growth
Risk controlled
We seek to maintain risk levels equivalent or below that of the broader market through a business cycle
We believe many mature domestic companies are relatively efficiently valued by the marketplace given abundant access to information across financial markets. That said, a keen focus on understanding the effects of long-run change on companies and industries provides opportunity to generate positive risk adjusted excess return within a mid to large cap universe of stocks. A focused portfolio of 40-50 holdings allows us to avoid companies undergoing competitive disruption or undifferentiated growth while owning only those businesses likely to see improved profitability and/or growth that is not properly discounted at today’s valuation levels.
Performance in differing market environments
Equity returns have experienced discreet periods of value or growth leadership. We embrace the flexibility inherent in a “core” mandate to actively manage the portfolio according to evolving opportunities.
Exposure to quality
We focus only on proven, cash generative companies with a record of profitability and competitive differentiation, resulting in a portfolio of stocks with return levels well-above the cost of capital.
Active risk management
We expect through-cycle risk metrics to be in-line to below that of our benchmark. Additionally, we expect to manage the expected contribution to active return from style bias.
Utilize proprietary in-house research to uncover businesses undergoing positive long-run change
- New market opportunities, secular adoption, cyclical inflections, macro/political shifts
Analyze the source of competitive advantage
- Avoid companies with apparent growth catalysts but unsustainable financial models
Pay attention to valuation
- Timeliness matters with respect to entry/exit points
- Ensure current price is supported by expectation for future growth and cash generation with a margin for error
- Avoid ‘over-hyped’ ideas
Construct portfolio
- 40-50 positions across most market sectors
- Companies with identifiable catalysts at reasonable valuations
Risk Management
- Active sizing of positions to achieve desired risk exposures
- Limit total risk and style-specific risk
For more information on our equity capabilities
Risks
The value of the portfolio may fall as well as rise, and you may not receive back the amount invested.
As a class, equities carry higher risks than bonds or money market instruments.
Because the strategy expects to hold a concentrated portfolio of a limited number of securities, the strategy's risk may be increased because each investment has a greater effect on the strategy's overall performance. We maintain a diversified portfolio representing a number of different industries, which helps to minimize the impact that any one industry could have on the portfolio.
IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The potential abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.
Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Strategy’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Strategy from executing advantageous investment decisions in a timely manner and could negatively impact the Strategy’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Strategy.
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