Our Investment Approach
Our investment philosophy and process
As a long-term investment manager, our valuation-based investment philosophy underpins all of our investment decisions and processes.
- We believe that the market is inefficient over the short term due to investor sentiment.
- We believe in mean reversion. This means that both high and low asset prices (relative to their long-term underlying true or intrinsic value) are temporary and will tend to ‘normalise’ or revert to their long-term intrinsic value. These short-term market inefficiencies create investment opportunities.
By applying our valuation-based investment philosophy and process consistently over time we find these opportunities both within and across asset classes to deliver long-term investment returns for our clients.
We apply our investment process with patience, diligence and focus
We identify opportunities through bottom-up fundamental analysis
The team analyses the value of an investment using bottom-up fundamental analysis. We compare current prices and valuations (based on an in-depth analysis of the investment) with long-term historical trends, rather than trying to forecast the future.
Long-term macroeconomic themes also play a key role in our process
We combine our bottom-up analysis with a top-down view on the economy. We specifically focus on normalised interest rates and inflation. Interest rates directly influence sustainable economic growth rates and inform the risk-free rate of return. Inflation affects real returns.
We consider and combine opportunities both within and across asset classes
We recognise the need to be expert at identifying and assessing opportunities both within asset classes and at an asset class level. This includes comparing different asset class behaviours and returns and, most importantly, relative to the returns that investors would receive from investing in cash.
We only invest if there is a margin of safety
All investments carry some degree of risk but, even within our high equity products, we only invest if there is an adequate margin of safety built into our valuations. We calculate a current fair market value based on the long-term historical relationships between economic and market variables, and we carefully measure the extent to which investors may be compensated for any inherent risks.