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A large-cap, global equity fund that is concentrated in nature and is invested in companies considered to be best-of-breed. A “Global Best Idea” is typically a firm that is a leader in its field and has sustainable growth and positive free cash flow attributes. Within its sector, the fund features within our ‘Larger-Cap, Growth’ category.
The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 6. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 6 means the fund’s historic volatility is between 15% and 25%.
An SRRI score of 6 is consistent with the risk of global equities. Our analysis indicates that the fund has a lower volatility profile than peers, despite its concentrated nature. This is in keeping with the focus upon high quality, large-cap companies with sustainable growth and cash flow characteristics. Different share classes could have different SRRI scores.
Head of Equity Management at Stonehage Fleming Equity Management, Gerrit Smit, is the lead manager of the fund. He is a highly experienced investor, having previously served as an equity analyst, Chief Investment Strategist and Chief Investment Officer. He works closely with deputy portfolio manager, Carolyn Bell. They are supported by a team of experienced analysts. They operate in a separate investment division of Stonehage Fleming Investment Management Limited, which in turn is part of the Stonehage Fleming Group, one of the largest pan-European multi-family office businesses.
The team believes that investors are rewarded for owning quality businesses for the long term and buying them at reasonable valuations. Such best-in-class businesses should have a strategic competitive edge, be able to generate sustainable growth in free cash flow and be attractively priced. They invest with the long term in mind and try to think like business owners.
The portfolio features 20-30 of the team’s best stock ideas which, collectively, offer a sensible degree of diversification. Individual position sizes of 4% are typical and the aim is to run a high conviction portfolio. The team is benchmark agnostic, meaning that the portfolio composition looks materially different from global equity indices. There are no geographical limitations, except that the maximum direct exposure to emerging markets is 30%. Risk-wise, an independent Performance & Investment Risk team produces monthly reports for discussion with the team and at the UK Risk and Controls Committee.
The investment process is bottom-up in nature, with the assessment of quality and valuation at its heart. The global investment universe is screened for size and liquidity, and then filtered down further using quantitative fundamental metrics in tandem with qualitative analysis, including third-party research where relevant. This process leads to a core universe of c.150 stocks, which are followed actively. The Investment Committee meets weekly and, at this forum, candidates from the core list are discussed. For each candidate, an analyst draws up a short report, incorporating a detailed valuation analysis, return expectations and a conviction score. Companies of interest are those that can grow organically on a sustainable basis, have good management and operating efficiency, and generate positive free cash flow on a sustainable basis. Companies that indulge in excessive corporate activity, struggle to execute on their plans, or display poor working capital management are always excluded.
If a stock is deemed worthy of consideration for the portfolio, a much deeper research project is undertaken to ensure it meets the requirements of a “Global Best Idea”. These are lengthy reports and written according to a template that encourages objectivity. Upon completion, the report is distributed to the Investment Committee members so that they can formulate their own conclusions. The portfolio manager co-ordinates the research effort, considers macro and market research, decides on cash allocations and is responsible for the construction of the portfolio.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
At The Adviser Centre, our primary aim is to support financial professionals in their fund selection and suitability work through independently-minded research, borne of decades of industry experience. Our process is framed by the fundamental concepts of “quality”, “value” and “utility”, through which we answer the key questions of why to invest in a fund, how it is likely to behave and how it can be deployed.
The Adviser Centre team members are some of the most experienced in the fund research industry. We can always look forward to robust and constructive discussions and we have great respect for their views and perspectives, which, given the breadth of their fund and market knowledge, come from an extremely well-informed position.
We have known and worked with the team for several years and we value their experience and the insights they provide to our own investment process. The service differentiates itself by its more focused nature and the information on their factsheets is useful in emphasising a fund’s key mandate, exposure and style biases, helping to explain the risk/return journey that our customers can expect.
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