The investment team takes a highly selective bottom-up approach to building a portfolio, so a typical portfolio will be a concentrated one of around 25-35 stocks which it considers to be amongst the strongest companies globally. The team defines strength as the staying power of a company’s competitive advantages and its scope to build upon its leadership position. The company must defend a superior return on invested capital (‘ROIC’) whilst maintaining robust cash flows and a healthy balance sheet. The investment team believes that companies cannot be world-class in the long term and meet the team’s definition of global strength if they do not take a sustainable approach to doing business. Companies that fail to respect all their stakeholders will alienate customers, struggle to attract the best talent and won’t be able to command the loyalty of long-term, engaged shareholders. Conversely, competitive advantages, barriers to entry, pricing power and shareholder returns can be augmented for those market-leading companies which embrace sustainability. Instead of viewing sustainability as a ‘trade-off’, we believe the winners of tomorrow with the fortitude to flourish will be those companies which are led by a purpose that goes beyond short-term profit maximisation, and those who conduct their business responsibly towards the environment and all stakeholders.

As such, the team’s investment philosophy relies upon detailed, fundamental analysis which concentrates upon carefully researching all the attributes of strength, as defined by the investment team, which must exist for candidates to qualify for portfolio inclusion. The philosophy, which has evolved over more than 30 years, is a natural extension of the one the team successfully applies to its European funds. It has been enhanced by an increased focus on sustainability and how by maximising their ESG opportunities, we believe companies can reinforce their competitive advantages, leading to long-term value creation and outperformance.

The team’s investment universe of around 3,000 companies is typically made up of companies with a market capitalisation of USD 3 billion and above. However, only around 150 companies pass the team’s fundamental strength analysis and are candidates for the 25-35 stock portfolio.

A minimum of 60% of the portfolio will be invested in companies that meet all five of the demanding attributes of strength, with up to 40% being invested in companies that are on track to meet the criteria within five years. Here, the team can actively engage with companies to drive change within the sustainability metrics. The team will not invest in companies that form part of Man Group’s RI exclusion list. This includes Controversial Arms and Munitions, Nuclear Weapons, Tobacco, and companies that generate more than 50% revenue from coal mining and power generation.

Universe is MSCI World TR Index with a market capitalisation of over USD 3 billion