Our Investment Philosophy

Our Investment Strategy

Our Investment Strategy.pdf
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Market crises are occurring with increasing frequency and severity. When many tradional asset allocation approaches fail, our multi-disciplined, global tactical strategy remains successful. We respond dynamically to rapidly changing conditions and invest in a more innovative combination of asset classes to achieve stable and positive returns.

Our Value strategy enhances the risk/return profile of a pure minimum-variance strategy, through single-stock selection and a proprietary global risk/rating model. For European, US, Global and emerging Markets Equities. As a specialist investment boutique, adhering to the highest professional standards, we ensure that our company offers investors successful, active and/or passive (core-satellite) portfolio management in equity, fixed-income and multi-asset strategies. Harnessing our passion for Equities, we create top-quality and transparent investment processes and generate first-class risk-adjusted performance for our clients.

 

Dividend Investing, when it's time for a defensive view:

 

In the context of portfolio construction, we believe it is wise to focus on companies that can consistently increase their dividends over time. There is plenty of evidence that companies that regularly raise their dividends reward their shareholders with superior returns in the long run, as shown in the chart.

A continually growing dividend can only come from a growing company and so, a rising dividend stream generally leads to a rising share price. Businesses with progressive dividend policies can be found all over the world, from the UK, US, Europe, Canada, Australia and Brazil. By investing globally, investors can benefit from the greatest choice of dividend-paying companies and valuable diversity. Dividend strategies have delivered excellent returns over the years but tend to be defensive in nature, holding up well when broader makets struggle but getting left behind when share prices rise rapidly.

This is why we select investments from three distinct categories, each with different risk/reward profiles, giving the portfolio the chance to perform well regardless of the investment background.

 

The three types of company we invest in are:

 

  • Quality: Disciplined companies with reliable growth like the Swiss company Nestlé.
  • Assets: Asset-backed companies with good capital discipline in industries that tend to be more sensitive to economic factors like the German company Siemens.
  • Rapid growth: Companies exhibiting high growth driven by geography or product line like Google.

 

The core of the portfolio is invested in the "quality" basket, which forms the bedrock of the fund. These companies tend to be large, global companies with stable cashflows and dependable dividend growth and are, typically, quite defensive in nature. The remainder of the portfolio is invested in the "assets" and "rapid growth" baskets, which tend to move more than the general market in a rally or decline. We believe that, by constructing the portfolio in such a way, the fund should be able to deliver strong returns over time, whatever the market delivers.

 

A solid dividend strikes the right balance of growth, value, and sustainability. 

 

 

Historical total return of stocks within the S&P500 between 1972 and 2010

 

 

Dividend Cutters and Eliminators represents stocks in the S&P500 that lowered or eliminated their dividend; Non-Dividend-Paying Stocks represent non-dividend paying stocks of the S&P500; Dividend Payers with No Change represents all dividend-paying stocks of the S&P500 that have maintained their existing dividend rate; all Dividend Paying stocks represents all dividend-paying stocks in the S&P500; and Dividend Growers and Initiators represents all dividend-paying stocks of the S&P500 that raised their existing dividend or initiated a new dividend.

 

  

 

 

 

 

Dividends matter!

Proportion of S&P500 total returns due to price and dividends analysed over different moving

Average periods, i.e. the average over a given period of time, from December 31, 1940 to December 31, 2011.

Factor Investing

Foundations_of_Factor_Investing.pdf
Adobe Acrobat Document 1.0 MB

Conclusion:

 

It is impossible to predict the pattern, sequence or consistency of investment returns for a particular bargain investment. It can only be stated with certainty that many studies have repeatedly shown investment in numerous groups of bargain securities over very long multi-year periods has produced execess returns.

 

Within the higher dividend yield universe studies have found a direct correlation between low payout ratios and higher returns. Research showed that for the period of January 1990 to June 2006, that the high yield, low payout portfolio bucket generated an annualized return for the period of  19.2% versus 11.2% for the S&P 500 Index. Arithmetically, the lower the payout ratio associated with a given level of dividend yield, the higher the earnings yield for the company, and the cheaper the stock based on price-to-earnings multiples. The high yield, low payout stocks that produced the better returns were priced at low ratios of price-to –earnings, and as a corollary, at high ratios of earnings-to-price; i.e., earnings yield.

Prudency  is part of our culture


Prudency is the starting point for our strategy.

 

We do not  track indices closely. Instead of focusing on relative risk, we look at absolute risk, while the whole finance industry is concentrating on benchmarks. 

And closely following a benchmark isn’t necessarily in clients’ interests. For both individual and institutional investors, preservation of capital is more important.

 

For institutional investors, such as pension funds, our focus on lower risk is also attractive because it can help stabilize funding ratios. 

So prudency isn’t just part of the strategy, it’s also part of our investment philosophy.

 

Active investment management is about blending your portfolio with low-volatility strategies and the inclusion of value and momentum factors, which has proven very effective over the past years.

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