Page 39 - Taking Stock 22 Summer 2019

Summer 2019 Taking Stock Product Spotlight Investment philosophy The Global Equities team believe the strategy’s ability to beat the market stems from the long- term market inef ciency between long-term fundamentals (cash ows) and short-term pricing. This is because markets tend to re ect current market values rather than price for longer-term outcomes – as seen in the close correlation between shorter-term earnings forecasts and share prices. A basic premise of the strategy is that cash ow compounding is the key driver of long- term share prices, while growth unlocks the compounding potential. Both are required to create, preserve and grow wealth, and so create the conditions for long-term cash ow compounding. Investment style and approach The team are long term, fundamental/bottom up, unconstrained global investors. They do not manage the portfolio to any benchmark and focus solely on allocating capital to companies that can bene t from sustainable and superior cash ow compounding over the long run and throughout the economic cycle according to our wealth creation framework. Although growth is often the output of wealth creation (the ability to persistently generate and expand pro ts over and above the cost of capital), they do not focus on growth in isolation recognising that growth in and of itself can be value destructive. They believe that by investing in exceptional companies they can help reduce risk over the long term while growing the real value of capital at attractive rates through a full market cycle (typically 5-7 years). The Fund’s wealth creation framework and the companies in which it invests, are the primary sources of risk reduction. In addition, the more predictable and certain the underlying cash ows of the investment, the more predictable and certain the pricing of those cash ows should be over the long term. This is important for long-term investors who require reassurance that the long-term fundamental growth in cash ows can be realised in market pricing at the point they choose to exit the fund. The Global Equities team believe the strategy’s ability to beat the market stems from the long- term market ine ciency between long-term fundamentals (cash ows) and short-term pricing. !BACK TO FEATURES 39