We believe combined focus on corporate economic profit (EVA) growth and country allocation drives long-term returns while controlling risk. We seek companies that can generate returns in excess of their cost of capital, thereby creating shareholder value. We emphasize countries with attractive value, growth/momentum and risk profiles.
Our process is underpinned by fundamental stock selection and aided by our proprietary country allocation framework. The global universe contains 46 countries. Political and liquidity screens eliminate a number of countries. The resulting country universe, representing more than 90% of MSCI All Country World Index by market capitalisation, is then scored and ranked for valuations, growth/momentum and risk. A minimum market cap screen of US$ 1.5 billion is applied in the security screening process. The remaining universe is then ranked based on historical and prospective valuation, growth and momentum characteristics. Companies that are in the top six deciles in this analysis are included in the next screening.
Subsequent EVA analysis reduces the universe to the ‘watchlist’. Selected names are reviewed using in-depth fundamental analysis to uncover companies with strong businesses and management, unrecognised growth potential and attractive valuations. The portfolio manager imposes disciplined controls at the country, sector, company and portfolio level.