High Conviction Strategy (HCS)

HCS is a concentrated global equity strategy. We employ a value-oriented active approach where we combine our quantitative stock selection model with the team’s fundamental knowledge of global equities, to create a 25-30 name portfolio. An active risk target of 4-5% pa to the strategy benchmark means we expect periods of significant deviation from broad markets.

Our quantitative model employs a multi factor approach:

Value: Multiple valuation factors to identify companies with lower expectations for their future cash flow growth and profitability

Momentum: Companies with evidence of a catalyst are better prospects: superior short-medium term volatility adjusted relative performance and earnings revisions

Quality: Companies that are better able to withstand adverse developments: sensible leverage, stable earnings growth and greater expected return on equity.

We verify the quantitative results with sensible fundamental analysis which assesses the following attributes:

Accounting: The nature and content of Financial Reports & Accounts. Is there any evidence of ‘aggressive’ accounting or changes in accounting reporting?

Strategic: Is our Quant model being ‘fooled’? Is there evidence of a decline and impairment of assets and thus a good reason for the share price to appear cheap? How distressed are the target asset’s competitors? Are there new market entrants or departures?

Governance: Is there sufficient separation of executive functions? The nature of asset share classes, particularly non-voting share attributes? Appropriate service provider independence?

We create an ESG score for the portfolio and compare this to the benchmark

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